UBS outstrips results forecasts
ZURICH, Switzerland (Reuters) -- UBS AG posted its best quarterly results in three years on Tuesday, outshining even the most optimistic forecasts, and called an end to the global bear market that has punished equity investors everywhere.
Rising revenues from investment banking and its core wealth management business combined with cost cuts boosted UBS's third-quarter net profit to 1.673 billion Swiss francs ($1.22 billion), compared to 942 million francs a year ago and 1.639 billion in the previous quarter.
Analysts in a Reuters poll had expected net profit of 1.414 billion francs for the world's seventh-largest bank.
"It's obviously true that the bear market is over," Chief Executive Peter Wuffli told reporters in a conference call.
While he declined to give a more detailed earnings forecast, Wuffli's upbeat tone pleased investors, and UBS shares were trading 1.2 percent higher at 82.85 francs at 0845 GMT, outperforming the broader banking sector, which was 0.8 percent lower.
"It's strong across the board," said analyst Vasco Moreno at investment bank Fox-Pitt, Kelton in London.
"The earnings quality is stronger than we have been expecting," agreed analysts at Bank Leu in a research note.
Highlighting its dominant position in the lucrative business of managing money for the rich, UBS saw 15.1 billion francs in inflows into its flagship wealth management division.
That was its strongest quarterly inflow ever and far better than the 8.4 billion francs seen at arch rival Credit Suisse's private banking unit in the same period.
Wuffli warned that the figure could fluctuate over quarters but insisted the jump in money inflows was not a blip. "We have no reason to believe that any of these sources would be a kind of a one-off," he said.
Total assets under management rose to 2,182 billion francs at end-September from 2,168 billion at the end of June.
The world's biggest asset manager has a track record of beating expectations and earned a solid reputation by generating profits during the downturn of the past three years, in stark contrast to some of its competitors. Analysts have been eager for proof that UBS is equally well positioned for an upturn.
Wuffli said the group -- which has positioned itself as a risk-averse bank -- would continue to focus on organic growth, as opposed to major takeovers, but added it would not shun smaller acquisitions to grow its business.
"We are basically on an organic growth strategy in our major business lines," he said.
Cash-rich UBS said last month it would buy the German private clients business of U.S. broker Merrill Lynch for an undisclosed sum. In September, UBS beefed up its presence in the lucrative U.S. hedge fund market, buying the prime brokerage unit of Dutch bank ABN AMRO for $250 million.
Wuffli added that UBS had no plans to expand in the retail business outside of its Swiss home market. "We confine our aspirations to retail banking in Switzerland," he said.
CS has hinted it may look for substantial purchases in the German mass retail market in three to five years' time.
UBS said its investment bank saw revenues in the fixed income, rates and currencies business rise 30 percent from a year ago, boosting the unit's pre-tax profit to 965 million francs. The result was in contrast to rivals such as CS and Germany's Deutsche Bank, where sharp drops in fixed-income trading revenues weighed on earnings.
Losses on UBS's private equity portfolio fell to 74 million francs before taxes from 418 million a year ago.
UBS's credit portfolio also performed well, reflecting what it said were "initial signs of global economic recovery." The bank realized a net recovery of 26 million francs compared to a net credit loss expense of 95 million francs a year ago.
Wuffli said UBS expected to cut more jobs, particularly in Switzerland, where it faces a mature market, but insisted he had no plans for large-scale cost cuts across UBS businesses.
The bank cut operating costs by six percent in the third quarter and has reduced headcount by four percent so far this year, far less than Credit Suisse.
UBS shares have risen about 22 percent so far this year, underperforming Credit Suisse's, which have jumped by about half amid market hopes the bank offers more recovery potential.
Credit Suisse last week reported a rise in third-quarter net to 2.045 billion francs, boosted by once-off factors, but warned more pain was needed to cement its turnaround from the worst loss in history suffered last year.
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