LONDON – UBS reported net earnings of $ 1.8 billion for the first quarter of 2021 on Tuesday as it impacted earnings from the Archegos Capital scandal.
The Swiss bank announced that revenues were down $ 774 million on the failure of the Archegos hedge fund, which collapsed last month after taking too much risk. The US-based family office was a client of UBS’s prime brokerage business.
UBS announced Tuesday that it had given up all holdings in Archegos and that any related losses in the second quarter would be “negligible” to the bank.
A number of banks have been hit by the scandal, including Credit Suisse, which posted a net loss for the quarter last week that increased to a loss of 4.4 billion Swiss francs ($ 4.8 billion) due to its collapse US hedge funds.
UBS CEO Ralph Hamers spoke to CNBC’s Joumanna Bercetche on Tuesday that the bank was “very disappointed” with the success.
“We take this very seriously. We have a very detailed review of the various prime broker relationships we have, the family office relationship we have, the risk management processes we have to really get those lessons learned and make sure we implement them so it doesn’t happen again in the future, “he said.
Hamers added that the prime brokerage business is “strategic” and that its capabilities support the wider business, but UBS needs to learn from what happened with Archegos.
UBS net income rose 14% year over year for the first quarter. According to Refinitiv, analysts had expected a value of 1.6 billion US dollars in the reporting period.
Further highlights of the quarter:
- Operating income was $ 8.7 billion compared to $ 7.9 billion a year ago.
- Operating costs were $ 6.4 billion compared to $ 5.9 billion a year ago.
- The CET 1 rate, a measure of the solvency of banks, reached 14% compared to 12.8% a year ago.
Hamers said the bank had “consistently increased customer activity” this quarter.
“In fact, the performance in asset management, asset management, investment banking and also in the activities here in Switzerland was very strong,” he told CNBC.
“So from that perspective a real, balanced and strong quarter if we didn’t have the loss we suffered, but even after the loss we got a return of 18.2% on CET1, which is really good.” Result.”
UBS said that future revenue in the second quarter will be affected by “seasonal factors” such as lower client activity compared to the first three months of the year. The Swiss bank expects higher asset prices to have a positive effect, but cautioned that there is “ongoing uncertainty” about the economic recovery that could affect its next profits.
“We should all be aware that there is a lot of optimism in the market and that there is clearly a lot of good news that has come to the market, but I also want to look at some of the challenges we are seeing. Will the pandemic be over.” “That is the question. Will vaccination go on as it is? How will the economy really recover?” Hamers said.