UBS Posts Earnings Beat as Ermotti Vows Not to Downsize Bank

(Bloomberg) — UBS Group AG boss Sergio Ermotti is certain of one thing in his pursuit of a settlement with the Swiss government over looming capital demands — he’s not giving up on growth.

“Shrinking is not an option,” the chief executive officer of the Swiss wealth manager said in an interview with Bloomberg Television’s Francine Lacqua on Wednesday, after posting better-than-expected second quarter earnings.

Talk of the Zurich-based bank selling units or moving out of the country are not “easy fixes,” the executive said, while refusing to be drawn on how serious deliberations to relocate the bank’s headquarters have become. The bank will give further details on its response to the government’s proposals by September.

“Having a global diversified business is a strength for us and for Switzerland,” Ermotti said.

The Zurich-based bank said Wednesday that net income was $2.4 billion in the three months to June. Client inflows at the key wealth management unit reached $23 billion, in line with forecasts. The bank’s business, serving the investment needs of the global ultra-rich, was buoyed in the quarter by an easing of trade tensions that could unblock pent up funds.

“Our client conversations and deal pipelines indicate a high level of readiness among investors and corporates to deploy capital, as conviction around the macro outlook strengthens,” the bank said in its outlook.

As the biggest global wealth manager, UBS has been warning for months that uncertainty over US President Donald Trump’s tariff plans was keeping investors on the sidelines and clogging up deals. Signs that major trading partners including the European Union and Japan are coming to terms with the White House are dispelling some fears while unpredictability remains.

“First of all we need to reach agreements, and then they need to see that there is a degree of predictability and stability in these agreements,” Ermotti said in the interview.

UBS shares rose as much as 3.7% after the open in Zurich on Wednesday, before paring gains to trade at 31.21 Swiss francs ($38.675) at 1:52 p.m.

UBS’s performance for the quarter was aided by results at the investment bank, in particular by a 20% boost in equities trading revenue that was in line with US peers. The result was also driven by factors including an unusual profit in the unit that winds down former Credit Suisse assets, and the release of provisions related to a legacy legal case.

Pretax profit at the wealth management unit was below estimates, with transaction-based income lower than expected.

UBS is facing higher capital requirements at home of as much as $26 billion, as part of a government reform aimed at preventing another crisis like the collapse of Credit Suisse.

Swiss policymakers have focused on the huge size of UBS in relation to the relatively small Swiss economy, even though it is one of the world’s richest nations. Politicians and officials are concerned that the country will not be able to rescue UBS again — as it did after the 2008 financial crisis — given its scale and global complexity.

That’s given rise to a debate over whether UBS could limit its growth — and executives have already offered to keep the size of its investment bank at a constant proportion of the balance sheet. Analysts have also raised the possibility that the lender may reduce its US operations.

“I’ve heard theories that we can simply move money, reclassify businesses or sell assets,” Ermotti said at a news conference. “It’s unrealistic to assume UBS shareholders or clients outside of Switzerland will bear the increased costs on their own.”

Earlier this month, UBS launched a previously-announced share buyback of as much as $2 billion for the second half of this year, bringing the total for this year to $3 billion. Capital returns for investors beyond this year are less certain, and the bank has said it will give an update with full-year results in early 2026.

“Overall a mixed set of results,” analysts at Citigroup Inc. including Andrew Coombs said in a note. “There is no update on capital return plans and it appears UBS’ lobbying efforts on recent Swiss capital proposals is set to continue, with the company reiterating that this creates an un-level playing field versus international peers.”

Ermotti addressed a smoldering scandal in Switzerland over customer losses linked to derivatives products on the back of currency swings earlier this year. The matter affects “less than 200 clients” and “a handful of client advisers,” Ermotti said. The bank has made some compensation payments to customers.

The matter has been addressed in the second quarter results and it “was not really a meaningful number,” Ermotti said.

–With assistance from Macarena Muñoz and Allegra Catelli.

(Updates with shares)

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