UBS Profit Beats Estimates in Boost to Ermotti's Buyback Plans

Ermotti said that the sell-off in global markets last week was a sign of continued fragility, and investors should pay attention to diversification.

In the integration, UBS said it had achieved a reduction of 42% in the Credit Suisse assets marked for wind-down since the second quarter of last year, and $8 billion in the last quarter alone.

The wealth management unit saw client inflows of $27 billion, maintaining the pace of the first quarter, though higher compensation costs for advisers brought the pre-tax profit lower than expectations, at $871 million. The division accounts for about half of UBS’s revenue.

UBS recently reorganized its wealth management arm into a new unit that brings its range of wealth offerings under one roof. The bank also reshuffled its leadership structure, appointing investment bank head Robert Karofsky to run its U.S. business and jointly oversee wealth with Iqbal Khan. Khan was also made president of the Asia-Pacific region.

The investment bank outperformed expectations, posting $477 million profit before tax in the quarter, driven by higher revenues in global markets and global banking businesses. Revenue from advisory was 23% higher year on year, and the underlying result for capital markets was up 82%, not including an adjustment related to the merger. The bank’s traders are likely to continue to profit from clients shifting their portfolios amid ongoing market volatility.

Into the third quarter, the bank said it expected to book about $1.1 billion in integration-related expenses, while the pace of cost-savings will decline modestly, it said.

In June, the bank offered investors in Credit Suisse funds linked to the collapse of Greensill Capital a deal whereby they would receive 90% of the fund’s value before they were shuttered. The bank said Wednesday that 92% of investors took advantage of the offer, helping to close another legacy issue from the takeover.

UBS continues to reduce the number of employees as it fuses the two global banks. Total headcount fell by more than 3,500 in the quarter, bringing the workforce to about 133,000. The bank’s CET1 ratio, a key measure of capital strength, stood at 14.9% at the end of the quarter.

Sergio Ermotti, CEO of UBS. Credit: Pascal Mora/Bloomberg