ZURICH (Reuters) -UBS announced more ambitious profitability goals and a continued plan to pare back costs on Tuesday, while also reporting a smaller-than-expected 18% slide in fourth-quarter earnings.
In its first major strategic review since Chief Executive Ralph Hamers took the helm in November 2020, Switzerland’s biggest bank said it wants to use technology to help it increase revenues and reach more customers in the years ahead, while also continuing to streamline its setup to bring costs down.
“UBS is in better shape than ever,” Hamers said in a statement. “We’re adapting our coverage models to deliver more digital and scalable advice as well as bespoke solutions.”
Net profit or income attributable to shareholders for the quarter tumbled to $1.348 billion after the lender took a $740 million litigation provision for a French tax case. Bumper trading volumes led to a surge in earnings for the last three months of 2020.
That compares with a median estimate of $863 million in a poll of 23 analysts compiled by the bank.
UBS’s full-year net profit of $7.457 billion outpaced the consensus expectation of $6.976 billion.
It set a more ambitious 70%-73% target for its cost-income ratio, while also saying it aimed to boost the returns it generates off core (common equity tier 1) capital to 15%-18%, up from its previous guidance for 12%-15%.
The world’s biggest wealth manager, UBS sailed through the COVID-19 pandemic thanks to buoyant markets and a spike in trading by its ultra-wealthy clients.
On Tuesday, the bank said it had continued to see high levels of client activity in its core wealth management division, with increases in revenue from lending, recurring fees and transactions pushing up operating income 13% year-on-year. Profit for the division, however, was hit by money set aside for the tax case.
The division posted $26.9 billion in fresh fee-generating client inflows, which with gains in asset prices, pushed invested assets in its global wealth management business up 3% sequentially to $3.303 trillion.
Its asset management division saw pre-tax profit fall 17% with the bank citing more “normalized levels” for performance fees, while profits from investment banking soared 35% on the back of higher revenues from trading and dealmaking.
(Reporting by Brenna Hughes Neghaiwi; Editing by Michael Shields and Edwina Gibbs)
