UBS paints a bleak picture for wealth management amid falling rates

UBS gave a darker picture of its business managing money for the wealthy than analysts expected for the second quarter, sending the Swiss bank’s shares tumbling 6%.

The bank said rising interest rates helped offset falling fees in its core wealth management business, boosting its quarterly profit. But net profit of $2.1 billion was below the $2.4 billion analysts had estimated, partly because of a weaker performance than U.S. rivals in stock and bond trading at the bank UBS investment.

UBS said recurring fees from wealthy clients, the main source of income, fell 6% as investments had declined due to falling markets. These customers also largely avoided making new investments, and transaction-based revenue fell 17%. Analysts had expected smaller declines in both forms of revenue. They said they were concerned about asset outflows in some parts of the world and falling levels of lending to customers in Asia.

At UBS’s investment bank, income from corporate advice and equity and bond sales plunged 57%, reflecting a slowdown in deal-making globally.

TO READ UBS CEO Hamers: We won’t stop hiring or cut jobs just yet

But net interest income at the main wealth management division rose 24% from last year due to higher deposit margins from higher rates. UBS’s markets business focused on equity trading as well as interest rate and currency trading increased revenue by 10% on the previous year.

UBS’s asset management group got a boost from a one-off gain of $848m on the sale of its stake in a property firm.

Overall, the bank had “a good result in an environment with lower asset levels, more volatility and rising rates,” Chief Executive Officer Ralph Hamers said. He took over as chief executive in 2021 and largely adhered to the UBS business model that combined global wealth management with a smaller investment bank and a large Swiss presence. The bank has been putting in additional capital to expand in the US, including the $1.4 billion purchase of digital advice platform Wealthfront this year.

UBS is listed as one of the world’s largest wealth managers, with about $2.8 trillion in invested assets as of June 30, down from $3.14 trillion as of March 31. It says it has access to more than half of the world’s billionaires for wealth management and deal-making, and is increasingly targeting the less wealthy with investment products and digital advice.

The bank’s new chairman, Morgan Stanley veteran Colm Kelleher, aims to turn UBS into a global force again after it shrank in the wake of the 2008 financial crisis and a Swiss government bailout. UBS should be valued less like a European bank and more like large US peers with a similar business mix and global reach, Kelleher said.

UBS previously said it estimated it could earn an additional $1.7 billion a year in net interest income from a 1 percentage point rise in interest rates in its major markets.

Write to Margot Patrick at margot.patrick@wsj.com

Corrections and Amplifications UBS had $3.14 trillion in invested assets as of March 31. An earlier version of this article incorrectly said it was $3.14 billion. (Corrected on July 27)

This article was published by The Wall Street Journal, part of Dow Jones



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My name is Chasity. I love to follow the stock market and financial news!