Record quarter for UBS as profit doubles

UBS says a boom in bond trading has driven profit Keystone

Switzerland’s largest bank, UBS, has reported a record first-quarter net profit of SFr2.42 billion ($1.87 billion), double last year’s figure.

UBS said the “extremely strong” result had been driven by excellent market conditions, but the bank warned they were unlikely to continue throughout 2004.

Operating income was up by 33 per cent to SFr10.3 billion, with revenue growth in all businesses.

Pre-tax profit in its investment banking division was up 115 per cent from a year ago, with results driven by the best fixed income conditions since 2000 as well as strong equities trading income.

“This outstanding performance reflects the excellent conditions in major financial markets,” commented UBS chief executive Peter Wuffli.

“It also shows the pay-off from investing in our businesses counter-cyclically over the past few years – positioning ourselves for exactly these kinds of opportunities.”

The bank said net new money flows showed that its wealth and asset management businesses were growing fast.

The first quarter saw clients adding a total of SFr35.1 billion to their investments with UBS.

The result beat analysts’ expectations. “All in all, very good figures,” said banking specialist Regina Anhorn at Lombard Odier Darier Hentsch.

“It’s encouraging that equity revenues were also up, so it wasn’t only fixed income,” she added.

Strong first quarter

UBS, which is by far the world’s biggest asset manager, with SFr2.24 trillion in client assets, said the outlook looked positive.

“With our businesses firing on all cylinders and the growth indicators all showing positive, we have every reason to feel optimistic about UBS’s future,” said chief financial officer Clive Standish.

But although optimistic, the bank warned that the current “excellent” conditions were unlikely to continue.

In a conference call after the figures were released, Standish said UBS was well positioned to deal with any decline in fixed income revenues.

“We have a pretty wide and diverse portfolio of business activities. It’s something that doesn’t keep us awake at night,” he said.

Standish commented that UBS did not feel pressed to seek a major merger but would not be shy to make smaller purchases to round out its business.

“We don’t feel that it’s imperative or necessary to make a transformative or major acquisition,” he said.

Facing fines?

Tuesday’s figures followed news that UBS was facing fines from the United States Federal Reserve – the central bank of the US – after the discovery of illegal transfers of dollars from a Fed deposit at UBS to countries that are under a US trade embargo.

UBS said it had dismissed a number of employees and disciplined others after anomalies came to light last summer.

Among the beneficiaries was Cuba, still subject to US sanctions, and unnamed countries in the Middle East. However, a UBS spokesman denied that dollars had been delivered to Iraq.

UBS is one of only a few banks outside the US which acts under contract to the Federal Reserve to retire used banknotes and introduce new notes.

UBS spokesman Christoph Meier said that an “intensive” internal investigation had been going on since October.

He added that UBS had been working closely with the Swiss Federal Banking Commission and the Federal Reserve over the issue, which had involved small amounts of money.

Meier declined to speculate on what sanctions both bodies might take against UBS.

swissinfo with agencies

Key facts

UBS is the world’s sixth-largest bank and by far the leading global asset manager.
It was formed in 1998 with the merger of the Union Bank of Switzerland and the Swiss Bank Corporation.
The group has two headquarters – Basel and Zurich.
It employs a staff of 65,630.

In brief

UBS has made a record first-quarter net profit of SFr2.42 billion ($1.87 billion).

Operating income at SFr10.3 billion was up 33% compared with last year.

The group reported the best fixed income conditions since 2000.

It warned that the current “excellent” conditions were unlikely to continue.