UBS AG: Bottom Line Improves

| About: UBS Group (UBS)

On October 30, 2012, UBS AG (NYSE:UBS) reported solid performance for the third quarter of the current year. All business segments reported growth in their respective bottom lines, while the company also built a strong capital base during the second quarter. The bank reported pre-tax earnings of Swiss Franc CHF 1.4 billion after adjusting its own credit losses, impairment losses and restructuring provisions. This is against a pre-tax profit of CHF 951 million at the end of the second quarter of the current year. The improvement in the bottom line, when compared to the linked quarter, was largely due to an improvement in net interest and trading revenues.

Segmental Review:

The following segmental analysis is conducted after adjusting for onetime items.

Pre-tax profits for the Wealth Management segment jumped 20% to CHF 600 million, while the business experienced CHF 7.7 billion of net new money inflows from high net worth individuals across the Asia Pacific and emerging markets.

The Wealth Management Americas business segment presented a record consecutive third quarter pre-tax earnings record of $230 million, up 9%. The segment has received $4.8 billion worth of net new money since the beginning of the year.

Profits at UBS' Investment Banking segment remained CHF 178 million, while revenues increased in all business areas, largely on an increase in the market share in advisory and debt capital markets. Meanwhile, strong growth was seen in revenues from foreign exchange e-trading. However, foreign exchange revenues declined significantly. The bank is the fourth placed currency dealer.

Driven largely by alternative and quantitative investments, the performance fees from the Global Asset Management segment surged over two fold, increasing pre-tax profits by 5% to CHF 124 million.

The Retail and Corporate segment of the bank witnessed pre-tax profits of CHF 409 million, 3% up largely on strong new business volumes and an increase in client deposits.

Capital Position:

At the end of the third quarter, the bank maintained a Basel 3 Tier 1 common equity ratio of 9.3%, in proximity to the minimum Swiss regulatory requirement of 10% for year 2019. This is an improvement from the linked quarter's 8.8%. These facts reflect the bank's strong capital position, as the bank's risk weighted assets decreased by CHF 4 billion to CHF 301 billion.

The bank has already unveiled its plans for an overhaul of the bank's Investment Banking segment, which is expected to affect its business in New York and London the most. The bank intends to slash its workforce by 10,000 jobs by the end of 2015, as part of this overhaul plan. The intended result of this restructuring will be savings of about $6 billion. At the announcement of third quarter results, management announced acceleration in the implementation of this plan. We believe that if the plan is implemented as intended, the bank will benefit significantly.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Business relationship disclosure: The article has been written by Qineqt's Financials Analyst. Qineqt is not receiving compensation for it (other than from Seeking Alpha). Qineqt has no business relationship with any company whose stock is mentioned in this article.

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Tagged: , Foreign Money Center Banks, Earnings, Switzerland
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