UBS reports a 63% rise in net profit as the wealth management division soars

July 21, 2021: -UBS has beaten second-quarter earnings expectations as the wealthy poured money into its flagship wealth management business.

On Tuesday, the Swiss banking giant reported net profit attributable to shareholders of $2 billion for the second three months of the year. According to Refinitiv data, this marks a growth of 63% from the same period in the previous year and significantly above analysts’ expectations of $1.34 billion.

UBS attributed the success to “favorable market conditions and investor sentiment,” along with “continued momentum inflows and volume growth” in its earnings report.

“Our growth in the second quarter was underpinned by the relationships we have built and strengthened in the pandemic and by the trust, our clients place in our people and our firm. All the business divisions and all regions contributed to our results,” UBS CEO Ralph Hamers said.

“Momentum is on our side, and our strategic choices and initiatives are paying off. And we are waiting to make the most of the future.”

On Tuesday, Hamers told CNBC that the bank’s strategic focus on particular sectors and clients was starting to manifest as the growing demand.

“All the changes that we made over the last one to two years around the banking side are paying off, and with that, you see that we are gaining market share. It is because of the focus on our client franchise,” he added.

The flagship Global Wealth Management division of the bank was the most significant contributor to the results, which generates a 47% rise in quarterly profit before tax to $1.3 billion. Recurring net fee income also raised by 30%.

Hamers said that while solid market momentum had boosted the wealth management division and stimulated more investment demand from clients, the underlying trends were promising too.

“We profit from market developments but if you look at the inflows in net fee-generating assets of $25 billion in a quarter in the wealth business, if you look at the underlying transaction income growing by 16%, then you see that there is a real increase in activity, from the clients and not just the market,” he said to CNBC.

In a message released alongside the earnings report, Hamers highlighted that credit card transactions in Switzerland had returned to pre-Covid levels, while investors worldwide were increasing more optimistic about the short-term economy.

“If I were to characterize last quarter with just one word, it would be this: momentum,” Hamers said.

The largest lender of Switzerland has also emerged from the shadow of the collapse of U.S. hedge fund Archegos Capital. The scandal affected a $774 million hit to profits in the first quarter and stunned investors.