Swiss banking giant UBS AG (UBS) reported Tuesday a decline in the first-quarter profit due to increased operating expenses even as operating income benefited from a surge in trading income mainly from investment bank segment.
Looking ahead, the company said, "The absence of further sustained and credible improvements to the eurozone sovereign debt situation, European banking system issues, ongoing geopolitical risks, and the outlook for growth in the global economy together with an increasing focus on unresolved US fiscal issues would continue to exert a strong influence on client confidence, and thus activity levels, in the second quarter of 2013."
UBS added that these would make further improvements in prevailing market conditions unlikely and would consequently generate headwinds for revenue growth, net interest margins and net new money.
In its first quarter, UBS generated net profit attributable to UBS shareholders of 988 million Swiss francs, 5 percent lower than last year's profit of 1.04 billion francs. Earnings per share declined 4 percent to 0.26 franc from 0.27 franc a year ago.
Profit before tax dropped 8 percent to 1.45 billion francs reflecting higher operating expenses, partly offset by improved operating income. On an adjusted basis, profit before tax was 1.90 billion francs, lower than last year's 2.13 billion francs.
Sequentially, UBS turned around from a loss of 1.90 billion francs in the fourth quarter as markets were buoyant at the start of the year, reflecting in particular positive developments in the US, leading to a sharp rise in client activity.
Total operating income in the first quarter increased 19 percent to 7.78 billion francs from 6.52 billion francs last year. A 7 percent decline in net interest income to 1.48 billion francs was more than offset by a 7 percent increase in net fee and commission income as well as a 128 percent surge in net trading income.
Meanwhile, the growth in operating income was more than offset by a 28 percent jump in total operating expenses to 6.33 billion francs.
The company's first-quarter cost / income ratio grew to 81.2 percent from last year's 76.4 percent.
The company noted that its wealth management segment delivered the highest levels of quarterly net new money since 2007, and the highest quarterly profit since 2009.
Commenting on UBS's first-quarter results, Chief Executive Officer Sergio Ermotti said, "While it is too early to declare victory, we have shown our business model works in practice. Although markets improved, we still saw challenges, so I am very pleased with our performance. We have surpassed the capital ratio threshold for systemically relevant Swiss banks six years early, and our leading capital position continues to be a competitive advantage for the bank."
On NYSE, UBS shares closed Monday's trading at $16.78, up $0.24 or 1.45 percent.
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