Shares of UBS Group edged higher on Tuesday after the Swiss bank reported a strong quarter that was partly driven by higher interest rates and cost controls.
The stock was trading 5.1% higher, having climbed as high as 5.8% earlier in the session, its biggest gain since June.
UBS revealed that its net profit for the third quarter was down 24% to $1.7 billion or $0.52 per share as it saw less market activity, although the figure ended better than expected due to an increase in client funds.
The Zurich-based company’s total revenues also slipped 10% year-on-year to $8.2 billion in the three months to September 30, but still higher than forecasts of $8.1 billion.
UBS in a Challenging Environment
UBS strengthened on robust activity among its institutional clients, plus surging interest rates and cost controls. However, the firm said recent market volatility had prompted private investors to seek safety.
UBS Chief Executive Ralph Hamers stated that the macroeconomic and geopolitical environment has gradually become complicated, and clients remained worried about higher inflation and energy prices, as well as the Russia-Ukraine war and the remaining impact of the COVID-19 pandemic.
US and European central banks’ responses to persistently high inflation resulted in a tailwind in lending revenue, keeping significant dividend and share buyback plans despite a gloomy economic outlook.
Nonetheless, banks worldwide have observed the energy crisis, the Ukraine war, and China’s sluggish economy weigh on equities and deal-making revenue.
Hamers also warned that many clients in the retail and those running small businesses in Switzerland would face disruptions across Europe, particularly in gas markets. In addition, the UBS head expects global uncertainty to impact client activity levels in the fourth quarter.
The banking giant’s clients on the wealth side were seeking alternative investments and cash, and activity on the institutional side of its trading division may stay weak in the next quarter, according to Hamers.
