UBS’ global wealth management profit fell by 11% year-over-year, though the drop was far less drastic when excluding litigation expenses, according to the bank’s second quarter earnings report.
The global wealth management before-tax profit stood at $1.16 billion in Q2 2022, compared to about $1.3 billion in the second quarter of 2021, though the bank noted that had been a “record quarter” for profits.
The wealth management numbers came in the context of one of “the most challenging periods for investors in the last 10 years,” according to a statement from UBS CEO Ralph Hamers, citing inflation, the ongoing war in Ukraine and the ongoing ramifications of China’s COVID-19 policies.
“Institutional clients remained active on the back of high volatility. We supported them with advice and execution while handling very high volumes,” Hamers said. “At the same time, private clients stayed on the sidelines. We continued to support them with deposits and loan offerings, both of which saw particularly robust year-on-year growth in the Americas.”
According to UBS’ full report on its Q2 earnings, the 11% drop in profits was primarily due to “lower total revenues and higher operating expenses,” with UBS Chief Financial Officer Sarah Youngwood noting the profit-before-tax only dipped by 2% when excluding litigation costs.
Net interest income boosted by $242 million, or 24%, YoY to $1.27 billion, primarily due to higher deposit revenues, which was driven by higher deposit margins due to rising interest rates and deposit volumes, according to the report. The NII jump partially offset a decrease in total revenue, which fell by $83 million to about $4.68 billion; the drop was largely due to decreases in both transaction-based and recurring net fee income, according to UBS.
In UBS Americas' wealth management business, pre-tax income fell by $108 million to $397 million, a 21% drop, although income was flat when excluding litigation costs, according to the earnings report (litigation expenses included a recent $25 million settlement with the Securities and Exchange Commission over charges related to the firm's Yield Enhancement Strategy). Revenue climbed by 1% to $2.6 billion, while the cost/income ratio jumped to 85% and loans increased nearly 4% from Q1. UBS’ Americas wealth management business had 6,139 full-time equivalent advisors this quarter, compared with 6,274 in Q2 2021.
UBS particularly cited the war in Ukraine (and the subsequent sanctions on Russia, Russian entities and individuals) for its huge impact on the year, calling it one of the largest humanitarian crises in decades. While noting the global ramifications of the crisis would be felt for some time, UBS said it was monitoring the cascading effects on clients, including supply chain disruptions and impact on sectors like energy.
The bank also highlighted the SEC's proposed rule earlier this year on climate-related risk disclosures as a significant regulatory development, saying the new requirements would apply to the business next year and show up in its 2023 Annual Report.
Earlier this month, UBS named Iqbal Khan as the incoming president of the bank’s global wealth management business starting in October, with Naureen Hassan taking over as the president of UBS Americas.