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UBS Group AG posted a robust quarter on the back of surging rates and cost control, enabling the Swiss bank to confirm a plan to return around $5.5 billion to investors this year.
UBS said net income in the three months to September was $1.73 billion, compared with analyst estimates of $1.57 billion. The wealth management unit saw lending revenue jump amid client inflows of $17.1 billion, while investment-banking revenue slumped.
The response to inflation by central banks in the US and Europe are giving banks a tailwind in lending revenue, helping to maintain ambitious dividend and buyback plans even as the economic outlook darkens. Global banks are nevertheless seeing equities and deal-making revenue hurt by the energy crisis, Russia’s war in Ukraine and the slowdown in China’s economy.
UBS Chief Executive Officer Ralph Hamers is leading an effort to boost automation, slim down management ranks and expand the lender’s presence in the US where it is eclipsed by local rivals. He faced a major setback in September when the bank announced it was pulling out of a deal to buy US robo-advisor Wealthfront.
The bank said that share buybacks should reach about $5.5 billion this year, adding detail to previous guidance of more than $5 billion.
“The macroeconomic and geopolitical environment has become increasingly complex,†Hamers said in the earnings release. The global uncertainty “may also affect client activity levels in the fourth quarter,†he warned.
At US peers, revenue and earnings were up in most cases, beating analysts expectations. But with the the prospect of a recession edging closer, US banks are starting to prepare with higher loan provisions. JPMorgan Chase & Co added $808 million to its loan provisions, whilst Wells Fargo set aside $784 million. By contrast, UBS released credit-loss provisions of 15 million Swiss francs ($15 million) in the personal and corporate banking unit.
UBS has been among the lenders hit by a slowdown in trading activity in Asia, driven by pandemic controls as well as a decreasing demand for exports. The tightening Covid controls in China have worried global investors since the start of the year.
—Bloomberg