UBS faces political uncertainty with strong Q1 results

8 years ago - Published in Finance, Fundamental Analysis

UBS delivered very strong first-quarter results with an adjusted profit before tax of CHF 1,934m, up 42% year on year. Adjusted operating income increased 8%, driven by the Investment Bank, Wealth Management Americas and Wealth Management, and the firm continued to make progress on its net cost reduction program. Despite facing a variety of market conditions and client activity levels, all business divisions and regions contributed to the improvement in performance. Reported pre-tax profit was up 73% year on year to CHF 1,690m. Net profit attributable to shareholders was CHF 1,269m, up 79% year on year, with diluted earnings per share of CHF 0.33. Group annualized adjusted1 return on tangible equity was 12.6%, or 17.4% excluding DTA.

Rising interest rates, a booming stock market and improved investor sentiment boosted the group's U.S. business, while improving Asian markets saw clients there begin taking more risks after a slowdown in late 2015 blunted trading appetite.

UBS had said it hoped optimism surrounding new U.S. President Donald Trump's proposed policies would boost its core wealth management business.

That optimism, communicated just seven days after Trump took office in January, translated into a 10 percent rise in transaction-based income for Wealth Management Americas, even as the unit's gross margin dipped compared to the previous quarter.

The company noted that the global recovery is likely to continue, but challenges of macroeconomic uncertainty, geopolitical tensions and divisive politics may affect client sentiment and transaction volumes. Low and negative interest rates, particularly in Switzerland and the eurozone, continue to present headwinds to net interest margins.

Sergio Ermotti, Group Chief Executive Officer, said, "Our very strong results in the first quarter highlight the power and potential of our franchise. We will continue to manage our business with discipline, focusing on sustainable performance and long-term growth."

UBS’s Board of Directors has proposed a dividend of CHF 0.60 per share to shareholders for the financial year 2016. Subject to shareholder approval, the dividend will be paid out of capital contribution reserves on 10 May 2017 to shareholders of record as of 9 May 2017. The ex-dividend date will be 8 May 2017.