UBS Has Higher Profits Than Expected Despite The Pandemic

UBS Has Higher Profits Than Expected Despite The Pandemic
TradeGM Analysis date_range April 27th, 2021

UBS increased its earnings in the first quarter of 2021 thanks to higher revenues and lower credit risks. The company’s net income climbed to $1.82 billion from $1.6 billion over the same period last year. The company also revealed that its’ profits suffered from the Archegos scandal. 

Apparently, the revenues were lower by $774 million against the forecast, as a result of the collapse of the hedge fund. Archegos Capital was the client of UBS’ prime brokerage firm. UBS’ operating income hit $8.7 billion this quarter, while last year it was $7.9 billion over the same period. Operating expenses declined from $6.4 billion to $5.9 billion a year ago. 

UBS CEO Ralph Hamers said the bank was highly disappointed by the hit. 

“We are taking it very seriously. We have started a very detailed review of the different prime brokers’ relationships that we have, the family offices’ relationship that we have as well, the risk management processes that we have, in order to really get the lessons learned and make sure we implement them so that going forward it doesn’t happen again,” he said

Despite his disappointment, Hamers said that “performance was really strong across wealth management, asset management, the investment bank and also the activities here in Switzerland.”  

“So from that perspective actually a real, well balanced and strong quarter if it weren’t for the loss that we also had to take, but even after the loss, we performed at a 18.2% return on CET1, which is a really good result,” he added. 

Hamers is optimistic for the bank’s future but worries whether the economy will recover following the pandemic. While revenues may be affected in the second quarter, the bank does expect profits to grow from higher asset prices. The bank CEO added, “We should all be aware there is a lot of optimism in the market and clearly there is a lot of good news that has come to the market, but I would also want to look at some of the challenges that we see. Will the pandemic be over? That is the question. Will vaccination continue the way it is? How will the economy truly recover?”  

Nomura Announces Losses From Archegos Scandal 

Nomura Holdings Inc has announced losses of around $2 billion last month, which added to its tally of $2.85 billion. The damage included a loss of 245.7 billion yen, about $2.27 billion for the year ending in March. The losses are directly linked to the Archegos scandal. 

“We are not planning to make major changes to our U.S. and global business strategy, “commented Nomura’s CEO Kentaro Okuda during a media briefing. Nomura plans to improve its risk-management systems but commented that they have not had similar problems with other clients. 

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CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75.42% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. X