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Wednesday, September 22, 2021

UBS first-quarter profit up 14%, but CEO ‘very disappointed’ with hit from Archegos scandal

UBS first-quarter profit up 14%, but CEO ‘very disappointed’ with hit from Archegos scandal [ad_1]

LONDON — UBS reported on Tuesday internet earnings of $1.8 billion for the primary quarter of 2021, because it revealed a hit to earnings from the scandal involving Archegos Capital. UBS shares have been down nearly 2% in early European buying and selling hours.

The Swiss financial institution stated revenues have been $774 million decrease because of the default by the Archegos hedge fund, which collapsed final month after taking over an excessive amount of danger. The U.S.-based household workplace was a shopper of UBS’ prime brokerage enterprise.

UBS stated Tuesday it had exited all publicity to Archegos and any associated losses within the second quarter can be “immaterial” for the financial institution.

A lot of banks have been affected by the scandal, together with Credit Suisse, which reported final week a internet loss for the quarter on the again of a 4.4 billion Swiss franc ($4.8 billion) hit from the collapse of the same U.S. hedge fund.

Speaking to CNBC’s Joumanna Bercetche on Tuesday, UBS CEO Ralph Hamers stated the financial institution was “very disappointed” by the hit.

“We are taking it very seriously. We have started a very detailed review of the different prime brokers’ relationships that we have, the family offices’ relationship that we have as well, the risk management processes that we have, in order to really get the lessons learned and make sure we implement them so that going forward it doesn’t happen again,” he stated.

Hamers added that the prime brokerage enterprise was “strategic” and that its capabilities assist the broader enterprise, but nonetheless UBS wanted to be taught from what occurred with Archegos.

UBS’ internet earnings for the primary quarter marked a 14% improve from a 12 months earlier. Analysts had anticipated the determine to return in at $1.6 billion over the interval, in keeping with Refinitiv.

Other highlights for the quarter:

  • Operating earnings hit $8.7 billion from $7.9 billion a 12 months in the past.
  • Operating bills got here in at $6.4 billion from $5.9 billion a 12 months in the past.
  • CET 1 ratio, a measure of financial institution solvency, reached 14% versus 12.8% a 12 months in the past.

Hamers stated the financial institution had seen “continuous heightened client activity” this quarter.

“Actually performance was really strong across wealth management, asset management, the investment bank and also the activities here in Switzerland,” he informed CNBC.

“So from that perspective actually a real, well balanced and strong quarter if it weren’t for the loss that we also had to take, but even after the loss, we performed at a 18.2% return on CET1, which is a really good result.”

Going ahead, UBS stated that revenues within the second quarter will probably be affected by “seasonal factors,” akin to decrease shopper exercise in comparison with the primary three months of the 12 months. The Swiss financial institution expects a constructive impact from increased asset costs, but warned that there’s “continued uncertainty” in regards to the financial restoration, which might impression its subsequent earnings.

“We should all be aware there is a lot of optimism in the market and clearly there is a lot of good news that has come to the market, but I would also want to look at some of the challenges that we see. Will the pandemic be over? That is the question. Will vaccination continue the way it is? How will the economy truly recover?” Hamers stated.


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