Swiss banking giant UBS today reported that its net profit rose 47% in the second quarter ended June 30, thanks to healthy results from its private-banking and investment-banking operations.
UBS said net profit for the quarter was 3.5 billion Swiss francs ($2.87 billion) in the second quarter of 2006, up from CHF 2.15 billion in the same period a year earlier.
Financial businesses contributed CHF 3.03 billion to net profit, up 51% from a year earlier. The rest came from its industrial holdings, which now comprise only the private equity portfolio.
“Our performance was strong ˆ and achieved despite the market reversal in the middle of May. Recurring income continued to benefit from the high levels of invested assets. Underwriting fees were at a record. Corporate finance and brokerage fees rose, as did revenues from trading activities,” said Clive Standish, the firm’s chief financial officer.
Total operating income from the financial businesses rose 33% from the same period a year earlier. Asset-based revenues, such as fees from investment funds or portfolio management, continued to benefit from the high levels of invested assets, it noted. Also, underwriting fees were at record levels due to growth in equity underwriting across the globe.
In investment banking, UBS did especially well in Asia, including acting as joint global coordinator and bookrunner in the initial public offering of the Bank of China. Corporate finance fees were up from the same period a year earlier in the brisk merger and acquisition environment, it said. Brokerage fees from institutional and private clients also rose, with activity being especially vigorous at the beginning of the quarter.
Revenues from trading activities rose in all products. In equities, the rise was led by derivatives and the expansion of prime brokerage, it said. Fixed income saw increases in mortgage-backed securities and derivatives. Foreign exchange trading revenues also rose.
Net income from interest margin products rose due to growing margin lending volumes in the wealth management businesses.
Looking ahead, the firm said that the more difficult trading conditions that developed towards the end of the second quarter have continued. “Growing geopolitical concerns, combined with worries about the pace of future economic growth, inflation and the implications for monetary policy and interest rates, continue to affect investor activity and invested asset levels,” it said. “This could indicate a return to a more normal seasonal pattern for financial firms, where a strong start to the year is followed by softening performance in the second half.”
“On the other hand, corporate sector balance sheets and profits remain robust, merger and acquisition activity strong, and the secular growth drivers for the wealth and asset management industry remain intact. The deal pipeline of the investment bank remains healthy,” it added.
“When market conditions become more difficult, the trust that clients have in our advice becomes especially important. We believe this will be another year of strong results,” said Peter Wuffli, CEO of UBS.
(1 Swiss franc = $Can 0.91)