UBS beats expectations with solid performance

Business is booming for UBS

Switzerland's largest bank, UBS, has reported that net profit for the first half of the year jumped by 40 per cent over the same period last year to SFr6.65 billion ($5.36 billion).

This content was published on August 15, 2006 - 08:05

The result was helped by revenue from trading and managing the assets of the rich.

The inflow of net new money at the bank, which is the world's largest wealth manager, climbed to SFr84.3 billion from SFr66.2 billion a year ago.

UBS said net profit in the second quarter had risen by 47 per cent to SFr3.15 billion, up from SFr2.15 billion in the same period in 2005.

"Our performance was strong – and achieved despite the market reversal in the middle of May. Recurring income continued to benefit from the high levels of invested assets," commented the bank's chief financial officer Clive Standish.

"Underwriting fees were at a record. Corporate finance and brokerage fees rose, as did revenues from trading activities," he added.

The bank said that net new money into its wealth management business in the second quarter was SFr31.2 billion, down from the record SFr33l.6 billion in the first quarter but ahead of most analysts' expectations.

UBS said that in the second quarter it performed particularly well in Asia, including as joint global coordinator and bookrunner in the initial public offering of the Bank of China.

Overall performance was further helped by gains on the disposal of financial investments in its investment bank.

Costs rise

Total financial business operating expenses rose by 25 per cent to just over SFr8 billion. UBS explained that the increase was due to higher staff and general and administrative costs as it continued to expand its business in all key markets.

Analyst Andreas Venditti at the Zurich cantonal bank said that UBS had clearly outshone its two European peers (Deutsche Bank and Credit Suisse).

"Overall these are strong numbers especially on the investment banking side and not at all weak as the others," he commented.

"New new money is strong in wealth management international and Switzerland but no so strong in the United States and in asset management."

In its outlook, UBS said the more difficult trading conditions that developed towards the end of the second quarter had continued.

Growing geopolitical concerns, combined with worries about the pace of future economic growth, inflation and the implications for monetary policy and interest rates, continued to affect investor activity and invested asset levels.

The bank commented that this could indicate a return to a more normal seasonal pattern for financial firms, where a strong start to the year was followed by a softening performance in the second half.

But it added that company balance sheets and profits remained "robust", merger and acquisition activity "strong" and the drivers for the wealth and asset management industry remained "intact".

The deal pipeline for the investment bank was also "healthy".

Strong results

"We believe this will be another year of strong results," said UBS chief executive Peter Wuffli.

On Monday, UBS announced it had completed the acquisition of the private client services branch network of the Piper Jaffray Companies in the United States

It confirmed it had retained about 700 financial advisers which corresponds to around 80 per cent of the acquired branch network.

The deal to buy the brokerage unit for wealthy investors, announced in April, is aimed at strengthening UBS's position in the US.

Switzerland's second-largest bank, Credit Suisse, earlier this month announced record first-half net profit of SFr4.8 billion ($3.9 billion), 68 per cent more than for the same period in 2005.

The second-quarter results showed a net profit of SFr2.16 billion, driven by a boom in investment banking and wealth management.

swissinfo with agencies

Key facts

Results for first half of 2006

Operating income: SFr24.437 billion (SFr18.9 billion in 2005)
Operating expenses: SFr16.422 billion (SFr13.141 billion)
Net income: SFr6.651 (SFr4.772 billion)
Basic earnings per share: SFr3.36 (SFr2.35)
Number of employees in financial businesses at the end of June: 71,182 up 2,313 from the end of December, 2005.

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In brief

The present UBS took shape in the 1990s through a series of mergers and acquisitions that transformed a mainly Swiss business into a global institution.

In December 1997 the Union Bank of Switzerland and the Swiss Bank Corporation announced their merger, which was completed in June 1998.

Later that year UBS had to declare a SFr793 million pre-tax loss after the collapse of the Long Term Capital Management (LTCM) hedge fund in which Union Bank of Switzerland had invested.

The firm's first major acquisition in 2000 was PaineWebber, the fourth-largest securities broker in the United States. This filled a strategic and regional gap in UBS's wealth management business.

In June 2003, the bank adopted the single UBS brand for all its major businesses.

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