UBS Posts Better-Than-Expected Profit as Volatility Boosts Trading Revenue — 2nd Update
By Adria Calatayud
UBS Group reported better-than-expected earnings, as market volatility fueled trading-desk activity and boosted revenue at its investment bank, and pushed back against Switzerland's plans to put stricter banking curbs.
The Swiss banking giant is bracing for the introduction of tougher capital requirements in its home market, as it navigates tariff-related uncertainty and continues to work on the integration of former rival Credit Suisse.
Switzerland outlined last month a draft proposal for a long-awaited update of its banking rules aimed at preventing another Credit Suisse-style meltdown. The proposed reform--still subject to consultation and legislative approval--hikes the capital requirements UBS would be subject to and faces opposition from the bank.
"No matter how CET1 capital ratios are presented, the proposal still results in an increase of around $24 billion in capital at the parent bank," UBS Chief Executive Sergio Ermotti said on a call with analysts Wednesday. "We will evaluate all potential and appropriate measures to address negative effects for our shareholders, but any mitigation strategies--even if feasible--would come at a significant cost."
Ermotti said the bank was actively engaging in the debate on future regulation in Switzerland and would provide an update on its position in September, when a consultation process on the proposal is due to end. The bank will hold off on taking any action for now, as no changes are expected before 2027, he said.
The remarks came after UBS reported a second-quarter net profit of $2.395 billion compared with $1.14 billion for the same period last year. Analysts had forecast net profit at $2.045 billion, according to consensus estimates provided by the bank.
Shares rose as much as 3.7% in European morning trading before paring back their gains.
UBS's revenue rose to $12.11 billion from $11.90 billion, helped by robust transaction activity. Its investment bank's global-markets segment experienced a record quarter, with revenue jumping 25% to $2.3 billion, UBS said. Transaction-based income at its global-wealth-management arm climbed 12%, it added.
This helped the group offset lower net interest income--the difference between what banks earn and pay on interest rates--in global wealth management as well as in its domestic bank.
The bank said it expects third-quarter trading and transactional activity to reflect more normalized seasonal patterns and activity levels compared with the same period last year, particularly when it comes to transaction-based revenue in global wealth management and the global markets performance of its investment bank.
"As we continue to see strong market performance in risk assets combined with a weak U. S. dollar, investor sentiment remains broadly constructive, albeit tempered by ongoing uncertainties and a degree of news fatigue," Ermotti said.
The integration of Credit Suisse remains on track to be substantially complete by 2026, the bank said.
UBS said it plans to complete a share buyback of up to $2 billion by the end of the year and that it would provide an update on its ambitions for the next year alongside its fourth-quarter results.
Write to Adria Calatayud at adria.calatayud@wsj.com