UBS Traders Drive Profit Jump as Bank Signals Bigger Buyback
(Bloomberg) — UBS Group AG traders helped drive profit in the first quarter, keeping the Swiss wealth manager on track to increase payouts to investors this year.
Net income came in at $3.04 billion in the three months to March, beating all estimates. The investment bank increased revenue by almost 30%, with equities and foreign exchange delivering the biggest boost.
UBS is giving cautious signals of increasing the $3 billion buyback already lined up for investors amid the ongoing tension in its home market over regulation. A draft law unveiled by the government this month would see its capital requirements increase by around $20 billion, with the bank lobbying hard against the changes as the matter moves into parliamentary debate.
The legislation, which seeks to address a weakness which emerged in the Credit Suisse crisis, would force UBS to fully deduct the capital in its foreign subsidiaries from that of the parent bank. Executives have labeled the package as “extreme” and argued it could inflict far-reaching damage on the Swiss economy.
UBS shares jumped as much as 5.9% after the open in Zurich on Wednesday, before paring gains.
UBS Chief Executive Officer Sergio Ermotti warned on Wednesday that the bank still faces a lack of clarity over its future regulation.
“It is going to take time,” he said in an interview with Bloomberg Television’s Guy Johnson. “This is a complex matter. I think we cannot really pretend that the parliament jumps to conclusions very quickly.”
In its outlook, UBS said that client activity “remains healthy” for now, reflecting expectations that a solution to the Middle East conflict will be reached. The bank said it expects second-quarter net interest income in wealth management and personal banking to be “broadly flat sequentially.”
Division Performance
In the investment bank, Global Markets and Global Banking units were able to capitalize on the frenzy in activity amid high market volatility and a weaker US dollar. Major Wall Street banks also reported a significant trading windfall in the first quarter.
The key global wealth management unit saw total revenues increase 11%, and net new assets rise from a year earlier to $37.4 billion. The Americas region saw a return to client inflows after experiencing multiple quarters of declines, while Asia Pacific inflows were particularly strong. The US would experience tax-related outflows in the current quarter, Chief Financial Officer Todd Tuckner said on a call with analysts.
Buyback Plans
The bank had previously announced a $3 billion share buyback program for 2026, which it had said could be adjusted upward depending on performance.
UBS said it had repurchased $0.9 billion in shares in the quarter, was on track to meet the $3 billion target in the third quarter, “with an aim to do more by year end.”
“UBS reported a strong set of results driven by elevated levels of client activity,” analysts at KBW wrote in a note. “We expect earnings estimates to be revised upwards, supporting a positive share price reaction at the open.”
–With assistance from Noele Illien, Paula Doenecke, Isabel Demetz and Macarena Muñoz.
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