Swiss banking giant UBS AG (UBS: Quote) said Tuesday its second quarter profit plunged 58 percent amid escalating eurozone fears and challenging market conditions. The lender also issued a cautious outlook.
Net profit plunged to 425 million Swiss francs or $434.6 million from 1.015 billion francs in the prior year and 827 million francs in the preceding first quarter. On a per share basis, earnings per share plunged to 0.11 francs from the year-ago quarter's 0.26 francs.
Net interest income dropped 3 percent to 1.393 billion francs, as interest income declined 10 percent from last year.
Total operating income was 6.408 billion francs, an 11 percent decline from the prior year, while operating expenses slid 1 percent to 5.457 billion francs.
Investment Bank reported a pre-tax loss of 130 million francs compared to a profit of 383 million francs last year, reflecting lower revenues amidst challenging market conditions. Advisory revenues declined 48 percent and revenue from Fixed income, currencies and commodities dropped 8 percent.
The segment's revenues were impacted by a 349 million franc-loss related to Facebook's initial public offering.
Pre-tax profit at the Wealth Management business declined 25 percent to 502 million francs and income declined 7 percent . That said, net new money at the Wealth Management business increased to 9.5 billion francs from 6.7 billion francs in the previous quarter due to strong inflows in Asia Pacific, emerging markets and Wealth Management Switzerland.
Wealth Management Americas reported a pre-tax profit of 200 million francs, up 43 percent from last year.
Global Asset Management reported a pre-tax profit 118 million francs, a rise of 9 percent from the prior year, although down 24 percent from the preceding quarter owing to lower performance fees, especially in alternative and quantitative investments.
UBS said its Basel 2.5 tier 1 ratio rose to 19.2 percent from 18.7 percent. The firm expects its Basel III tier 1 ratio to be comfortably above 9 percent by the end of the year.
The lender further said that supported by cost control, it is firmly on track to deliver planned cost savings by the end of 2013.
Peer Credit Suisse Group (CS: Quote) said recently that it plans to increase capital by 8.7 billion francs in preparation for Basel III regulatory requirements and increased its cost saving target. The lender's profit increased in its second quarter, benefited by lower expenses, even as revenues at private banking and asset management segments were hurt by adverse market conditions.
Looking ahead, UBS said client confidence will continue to be influenced by the events in Europe, geopolitical tensions and the US fiscal "cliff", thus affecting activity levels in the third quarter of 2012.
''Failure to make progress on these key issues, accentuated by the reduction in market activity levels typically seen in the third quarter, would make further improvements in prevailing market conditions unlikely and would thus generate headwinds for revenue growth, net interest margins and net new money,'' UBS noted.
UBS shares closed in Zurich on Monday higher by 3.90 percent at 10.93 francs on a volume of 14.12 million shares.
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by RTT Staff Writer
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