UBS Sees 11% Dip in Q2 2020 Profit, Beats Street Expectation

UBS, a Swiss investment banking giant, has announced a net profit of $1.23 billion for the second quarter of 2020, an 11 percent year-on-year drop as this number was $1.4 billion last year for the same quarter.

Today’s earnings report is the first by a European lender to unveil its second-quarter earnings report while many American peers have published excellent numbers.

While reporting the previous quarter’s financials, the bank already indicated an uncertain future in the coming quarters due to the impact of the COVID-19 pandemic on the global economy.

Beats market expectation by a significant margin

However, the reported figure beat the market expectation for earnings of $973 million, even in the bank’s own consensus summary of the average of 21 analysts.

“The strength, resilience, and diversification of our integrated business model have once again been confirmed by the strong second quarter results and the excellent first half,” Chief Executive Sergio Ermotti said in a statement.

“As we continue to face a challenging environment, we are adapting and accelerating the pace of change, supporting our clients, employees, and the economies in which we operate, while remaining focused on our strategic priorities.”

Ermotti will be replaced as the head of UBS by ING CEO Ralph Hamers on November 1 this year.

The second-quarter financials also show that the operating income of the bank hit $7.4 billion, compared to $7.5 billion a year ago; return on tangible equity stood at 9.6 percent, compared to 11.9 percent the previous year; and a 13.3 percent common equity tier 1 ratio, same as the previous year.

The bank also faced a 2 percent drop in credit loss expenses with $272 million - $110 million from that came in personal and corporate banking and another $78 million in the investment bank.

The bank witnessed a 118 percent surge in the revenue from foreign exchange, rates, and credit trading to $847 million.

With the pandemic-hit numbers, UBS is now reviewing the mix between cash dividends and share buybacks.

“While it is premature to provide guidance for 2020, going forward the intention is to continue to pay out excess capital and maintain the overall capital returns to shareholders consistent with previous level,” UBS added in its earnings report.