Swiss financial institution UBS mentioned it had misplaced $774m on trades at its prime brokerage unit linked to the blow-up of household workplace Archegos Capital, which dragged on in any other case strong first-quarter earnings.
The hit was lower than that suffered by its friends, which included a $5.5bn cost on the financial institution’s nearest rival Credit score Suisse.
UBS on Tuesday reported a first-quarter web revenue of $1.8bn, up 14 per cent yr on yr, and comfortably forward of analysts’ expectations regardless of the dent brought on by Archegos, as buoyant markets drove a surge in shopper exercise.
The financial institution mentioned it had totally unwound its publicity to Archegos, leading to an general discount of $434m to its quarterly web income.
Regardless of the loss, capital ratios improved on the financial institution, UBS mentioned. The quarter-end frequent fairness tier one capital ratio — a measure of financial institution capital to belongings — was 14 per cent, the financial institution mentioned, forward of steerage at 13 per cent.
“We’re all clearly disenchanted and are taking this very significantly,” chief government Ralph Hamers mentioned. “An in depth overview of our related danger administration processes is underneath method and acceptable measures are being put in place to keep away from such conditions sooner or later. This by no means impeded our skill to serve our shoppers.”
Excluding funding banking — the place revenue earlier than tax fell 42 per cent — income rose in all of UBS’s different major divisions throughout the quarter. Property invested on behalf of shoppers rose by greater than $100bn within the first three months of 2021 to $4.2tn.
Its flagship wealth administration enterprise posted a 16 per cent rise in income earlier than tax to $1.4bn. The enhance got here from shoppers shifting into larger payment producing income, but additionally an growing use of leverage, UBS revealed, with lending to rich shoppers — together with household places of work much like Archegos — growing to $219bn.
The asset administration division additionally benefited from larger payment revenue, reporting a forty five per cent year-on-year rise in first-quarter income earlier than tax to $227m.
Efficiency charges climbed 153 per cent within the division throughout the quarter as markets roared again on guarantees of presidency stimulus and the potential for vaccines to deliver an sooner than anticipated finish to the financial restrictions of the coronavirus pandemic.
UBS’s Swiss common financial institution additionally carried out nicely, as pre-tax revenue climbed 11 per cent to $358m.