Swiss banking giant UBS today published its third quarter results for 2016, in which the lender reports strong results with an adjusted profit before tax of CHF 1.3 billion ($1.31 billion) representing an increase of 33 percent year-on-year.
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Financial Metrics
Reported pre-tax profit was up 11 percent year-on-year to CHF 877 million ($883 million). Net profit attributable to shareholders was CHF 827 million ($832 million) with diluted earnings per share of CHF 0.22.
The strong performance was achieved despite sustained economic and geopolitical uncertainty, persistently low client activity and subdued primary market issuance.
As of 30 September 2016, the Group achieved CHF 1.5 billion ($1.51 billion) of annualised net cost savings on a normalized cost base, an improvement from CHF 1.4 billion ($1.41 billion) in the prior quarter, making steady progress towards the CHF 2.1 billion ($2.1 billion) 2017 year-end target.
UBS will continue to take steps to offset higher than expected regulatory and associated costs which totalled CHF 419 million ($422 million).
While the prior year’s third quarter included a net tax benefit of CHF 1.3 billion ($1.31 billion) this was offset by a net tax expense for the third quarter of 2016 of CHF 49 million ($49.32 million).
Wealth Management
Wealth management has come under focus as UBS continues to cut costs after profit at its wealth-management unit fell and the securities unit was hurt by a slump in Equities trading.
Nonetheless, Personal & Corporate Banking recorded a very strong adjusted profit before tax of CHF 473 million ($476million), up from CHF 428 million ($431 million) in the third quarter of 2015. Despite persistently negative interest rates, this represented the best quarterly result since the fourth quarter of 2008, with higher operating income and lower operating expenses.
Sergio P. Ermotti, Group Chief Executive Officer, commented: “We delivered a strong performance across our businesses, despite seasonality and continued macroeconomic, geopolitical and market headwinds. Our strong position allows us to focus on helping our clients navigate the current environment. We will continue to execute with discipline and manage risk and resources prudently.“
UBS’s capital position remains strong, with a fully applied CET1 capital ratio of 14.0 percent and a fully applied CET1 Leverage ratio of 3.45 percent. Risk-weighted assets (RWA) increased by CHF 3 billion from the prior quarter to CHF 217 billion, due to previously anticipated regulatory inflation.
Outlook
Underlying macroeconomic uncertainty and geopolitical tensions continued to contribute to client risk aversion and generally low transaction volumes while lower than anticipated and negative interest rates still present considerable headwinds which are unlikely to change in the foreseeable future.
In addition, implementing Switzerland’s new bank capital standards and the proposed further changes to the international regulatory framework for banks will result in increasing capital requirements and costs. The bank is, however, well positioned to deal with the challenges in light of today’s solid financial performance.
