UBS sees first-quarter profits surge but warns of tougher times ahead

UBS reported a jump in quarterly profits on Tuesday but conceded that lower asset prices and reduced client activity during the Covid-19 pandemic was likely to dent income going forward.

The Swiss bank said first-quarter pre-tax profits for the three months to 31 March rose 30% to $2.0bn, with all divisions showing increases. The core global wealth management business reported a 41% hike to $1.22bn.

The group cost-income ratio improved 6 percentage points to 72.3%, while return on CET1 capital was 17.7%. Diluted earnings per share rose 43% to $0.43.

Total net credit losses soared to $268m, however, compared to $20m in the previous quarter and just $8m in the first three months of 2019. Of that, $122m was in the investment bank, $77m was in personal and corporate banking, and $54m was in global wealth management.

Looking forward, UBS said Covid-19 and the introduction of lockdown measures had changed the global economic outlook "dramatically" for the foreseeable future. It argued that the range of possible outcomes currently remained wide and it was too early to make reliable predictions about a possible economic recovery.

But it conceded: "Lower asset prices will reduce our recurring fee income, lower interest rates will present a headwind to net interest income, and client activity levels will likely decrease, affecting transaction-based income."

It added, however, that the majority of its credit exposures were either in the global wealth management division or within Switzerland and were "of high quality".

Chief executive Sergio Ermotti said: "We enter these turbulent times from a position of strength. This quarter, UBS performed at its best in all dimensions, and demonstrated the true character of our organisation and our people."

UBS also said on Tuesday it would donate $30m to Covid-19 related aid projects and that the group executive board would give 50% of their salaries for six months to virus-related relief efforts.

As at 1030 BST, shares in UBS were trading 5% higher at CHF9.95.