UBS net profit tanks 11% in the second quarter

By: Wajeeh Khan
Wajeeh Khan
Wajeeh is an active follower of world affairs, technology, an avid reader, and loves to play table tennis in… read more.
on Jul 21, 2020
  • UBS net profit tanks 11% in Q2 as Coronavirus continues to weigh on performance.
  • The Swedish financial services company says its CET1 ratio remained unchanged at 13.3%.
  • The multinational investment bank expresses plans of reinstating share repurchases in Q4.

UBS (SWX: UBSG) published its quarterly financial results on Tuesday that highlighted an 11% year over year decline in its net profit in the second quarter. At £970 million, the bank’s net quarterly profit came in weaker than £1.10 billion in the same quarter last year due to the Coronavirus pandemic. UBS had reported a 40% increase in profit in Q1 in April.

Experts had forecast the Swiss multinational to print £766.51 million in net profit in the second quarter.

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Shares of the company opened more than 2% up on Tuesday and jumped another 2% on market open. At £9.87 per share, UBS is roughly 5% down year to date in the stock market after recovering from an even lower £6.27 per share in March when the impact of COVID-19 was at its peak.

UBS CET1 ratio comes in at 13.3%

Robust trading results offered significant support to UBS earnings in the recent quarter. COVID-19, however, continued to weigh on its performance in the retail and corporate banking segments. According to the financial services firm, its operating income saw a slight decline from £5.91 billion last year to £5.83 billion in Q2.

UBS said that its return on tangible equity came in at 9.6% in the second quarter versus the year-ago figure of 11.9%. Its common equity tier 1 (CET1) ratio stood at 13.3% in the recent quarter same as the comparable quarter of last year. Learn more about return on equity and its importance in investing.

The Swedish bank valued its loan loss provisions at £214.28 million in Q2. Its personal and corporate banking units contributed £86.66 million to provisions while another £61.45 million came from investment banking.

UBS may reinstate share repurchases in the fourth quarter

UBS also warned on Tuesday that group credit losses attributed to COVID-19 are likely to weigh on its performance in the second half of the ongoing financial year as well. The impact, however, will be diluted as compared to the first half. The bank said on Tuesday:

“While it is premature to provide guidance for 2020, going forward the intention is to continue to pay out excess capital and maintain the overall capital returns to shareholders consistent with previous levels.”

Based on business conditions, UBS may reinstate the share repurchase programme in the fourth quarter.

At the time of writing, the Swedish multinational investment bank and financial services company is valued at £33.79 billion and has a price to earnings ratio of 9.85.

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