UBS Profit Jumps on Wealth Management Boom
Topic of the day
The booming business of managing rich people's money boosted results for UBS Group AG, raising hopes that the Swiss banking giant will return more money to shareholders. Switzerland's biggest bank said net profit jumped to $2 billion from $1.23 billion a year earlier, outpacing analyst expectations of $1.34 billion. It said wealth clients traded more, pushing transaction revenues 16% higher from a year earlier, and added that recurring fees were 30% higher on their existing trades and products. At UBS's investment bank, deal advice for mergers and acquisitions and other corporate transactions pushed global banking revenue 68% higher, helping to offset a 14% decline in market-trading income. The high level of capital and the prospects for some of it to be returned to shareholders in additional buybacks or dividends pushed UBS shares up 4% early Tuesday. The bank refocused around wealth management a decade ago and pared back its investment bank. It has been less in the limelight than its smaller domestic rival, Credit Suisse Group AG, which lost more than $5 billion from the collapse of Archegos Capital Management. UBS didn't emerge unscathed from Archegos. It said markets revenue would have been flat but it took an additional $87 million hit during the quarter from the late-March default by the family office.
The Swiss stock market recovered on Tuesday from the previous day's losses. Although mostly positive quarterly figures came from the corporate side, concerns about the spread of the delta variant of the coronavirus remained. More and more investors are questioning the economy's continued recovery path. "The situation remains fragile," warned one market participant. The SMI gained 0.7 percent to 11,946 points. Among the 20 SMI stocks, there were 19 gainers and one loser. Turnover was 40.69 (previously: 42.53) million shares. Growth concerns were also reflected in the bond market, where yields fell further. This was not good news for the banking sector. Nevertheless, shares of Swiss sector companies held up extremely well, with UBS and Credit Suisse up 5.3 and 2.6 percent, respectively. The business figures of UBS were responsible for the good mood. The shares of the financial group Partners Group rose 1.2 percent. The company bought in France. In tow, Julius Baer rose 3.4 percent. Zurich Insurance and Swiss Re recovered 1.2 percent and 0.9 percent, respectively, from the previous day's losses when they came under pressure in the wake of billions of dollars in flood damage in several European countries. Swiss life rose 2.2 percent. Logistics company Kuehne & Nagel's second-quarter results were described as "excellent." What causes problems for industrial companies is reflected positively here, said a trader. The supply chains still not running smoothly led to strong price increases in transport. The share price rose by 0.6 percent. ABB acquires ASTI Mobile Robotics Group. The share price gained 1.7 percent, partly because industry player Alstom reported strong order intake. In the broad market, Adval Tech (unchanged) announced significantly better half-year results than last year. Medacta (+3.9%) and SFS (+2.8%) also presented business figures.
European stocks rose, setting a partial recovery after the worst session in the year amid worries about the lingering COVID-19 pandemic. Fears about the spread of the Delta variant of the coronavirus continued to weigh on risk appetite, however. "The prospect of weaker growth ahead thanks to the spread of the delta variant sent a violent shudder through global markets yesterday, which in turn led to one of the biggest risk-off moves in months," said Jim Reid, a strategist at Deutsche Bank. "With no clear catalyst to pinpoint for causing this turmoil, maybe this was the result of an overstretched market or maybe this happened due to increasing concerns that the fast-spreading delta variant of the coronavirus will hamper the global economic recovery. Maybe it's both," said Charalambos Pissouros, head of research at JFD Group. He did note that Federal funds futures, even amid the turmoil in the stock market, still are pointing to the first interest rate increase to be delivered during the first quarter of 2023. The Stoxx Europe 600 index gained 0.5% to 446.6 points, after losing 2.3% on Monday. In Paris, the CAC 40 and the SBF 120 gained 0.8% and 0.7% respectively. In Frankfurt, the DAX 30 gained 0.6% and the FTSE 100 in London rose 0.5%. Alstom (+2.5%) reported order intake and revenues above market expectations for the first quarter of its fiscal year ending March 2022. Its order intake was €6.4 billion, while its revenue was €3.7 billion. Gainers included metals producers Rio Tinto and BHP Group. Electrolux shares plunged 10%, as the Swedish appliance maker reported a worse than forecast operating profit and said supply shortages will make it difficult to meet its product mix goals.
U.S. stock prices rose sharply, with the S&P 500 recording its best day in nearly four months, as investors rushed in to buy shares that had been knocked down in Monday’s steep selloff. The Dow Jones Industrial Average climbed 549.95 points, or 1.6%, to 34511.99, while the broader S&P 500 gained 64.57 points, or 1.5%, to 4323.06. That marked that index’s biggest one-session gain since March 26 and nearly erased Monday’s 1.6% drop. The tech-heavy Nasdaq Composite added 223.89 points, or 1.6%, to 14498.88. Travel stocks were among the day’s top performers, suggesting many investors had reconsidered Monday’s fears that the Delta variant would disrupt the continued economic reopening. American Airlines Group Inc. shares gained $1.59, or 8.4%, to $20.56, while Norwegian Cruise Line Holdings Ltd. shares climbed $1.81, or 8.3%, to $23.68. One factor that could support continued gains by stocks: brightening expectations for corporate earnings. With about 11% of S&P 500 companies having reported, investors will parse results in the coming days and weeks. Among individual stocks, HCA Healthcare Inc. shares climbed $31.27, or 14%, to $248.90, an all-time high, after the healthcare operator logged a sharp rebound in revenue for the second quarter and raised its earnings forecast. Shares of Netflix Inc. slipped before recovering in after-hours trading as the streaming giant said it added 1.5 million memberships in the second quarter, topping its previous forecast for a million memberships but far short of the 10 million it added in the same period last year when much of the world was in lockdown mode.
Wednesday, positive signs predominate on the stock exchanges in East Asia. On the Tokyo Stock Exchange, the Nikkei 225 index rose by 0.7 percent to 27,573 points. The market is led by the automotive sector. Nissan rises by 2.4 percent, Mitsubishi Motors by 2.5 percent and Toyota by 1.4 percent. In Shanghai, the composite index gains 0.6 percent. On the stock market in Hong Kong, which has already been weaker than average in recent days, the Hang Seng Index lost 0.4 percent. The Kospi in Seoul increased by 0.4 percent.
Long-dated U.S. Treasury yields rebounded Tuesday on signs of a shift in investor sentiment, following Monday’s broad-based flight-to-safety on fears about the spread of the delta variant of the coronavirus that causes COVID-19. The yield on the benchmark 10-year U.S. Treasury note edged up to 1.208%, after dropping to 1.181% Monday in its largest one-day decline since March 2020.
Jefferies increases Ziel Delivery Hero to 180 (155) EUR - Buy
RBC increases Richemont target to 140 (131) CHF - outperform
Citi increases Rolls Royce target to 157 (153) p - Buy High Risk
Produced by MBI Martin Brückner Infosource GmbH & Co. KG on behalf of Swissquote. All news is acquired with journalistic accuracy. No liability is assumed for delays or errors.