October 27, 2017 / 9:33 AM / a year ago

UBS's buoyant ECM counters trading slump

LONDON, Oct 27 (IFR) - UBS reported a 14% rise in net profit in the third quarter from a year ago, as wealth management revenues picked up and strong equity underwriting revenue offset a slump in trading income.

The Swiss bank kept a cautious outlook for the rest of 2017, however, faced with the unwinding of the European Central Bank’s balance sheet and political tensions such as US-North Korea relations.

“High asset prices, uncertainty over central bank balance sheet and interest rate policies, seasonality factors and the persistence of low volatility may continue to affect overall client activity,” UBS said.

Revenues from foreign exchange, rates and credit revenues slumped 37% to SFr294m (US$294m) due to reduced client activity and low market volatility. It followed bigger European rivals Deutsche Bank and Barclays in faring worse than US rivals, which on average saw a 22% fall in FICC income.

UBS is less reliant on bond trading than rivals, however, and it fared better in the areas on which it is more focused.

Its equities revenues in the third quarter dipped 2% from a year ago to SFr784m, broadly in line with a flat performance by US peers and outperforming Barclays and Deutsche. UBS’s cash equities revenues fell 11% but derivatives revenues swelled 45% due to increased client activity.

Revenues from underwriting and advisory jumped 42% from a year ago to SFr651m, well ahead of an average 8% rise at US rivals. UBS’s equity capital markets revenues more than doubled to SFr283m, thanks to more private transactions and public offerings.

Advisory revenues rose 9% to SFr163m due to higher fees from merger and acquisition deals, while debt capital markets revenues also improved 9% to SFr205m, driven by higher leveraged finance and investment-grade revenues.

UBS’s overall group net profit was SFr946m, up from SFr827m a year ago and ahead of analysts’ forecasts. Its investment bank’s adjusted operating profit was SFr352m, up 3% on the year, on operating income of SFr1.8bn, flat on the year.

The bank said it intended “to begin implementation of contingency measures in early 2018” related to Britain’s exit from the European Union. (Reporting by Steve Slater; Editing by Philip Wright)

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