July 27, 2015 / 4:28 AM / 4 years ago

UBS fails to impress with forecast-beating earnings

ZURICH (Reuters) - Swiss bank UBS failed to impress investors with a jump in second-quarter profit and a boost to its capital as strong earnings from rival Credit Suisse last week had raised hopes for even better results.

Net profit rose 53 percent on the year to 1.2 billion Swiss francs ($1.25 billion) thanks to a solid performance across the board at Switzerland’s biggest bank, far above the 3.2 percent rise forecast in a Reuters poll of analysts.

But the figures, which followed blockbuster numbers in the first quarter, were not enough to boost UBS shares. They fell 1.5 percent at 1252 GMT (0852 EDT), albeit slightly outperforming a 1.8 percent drop in the broader banking index.

Better-than-expected profit last week from smaller rival Credit Suisse, and a surprisingly strong showing from its private banking arm, had raised expectations that UBS could post numbers well above forecasts.

“The numbers are almost a non-event,” said Kepler Cheuvreux analyst Dirk Becker, who has a ‘buy’ rating on UBS stock. “We were hoping for them to beat expectations. They’ve done that but not by a margin that would excite anybody.”

Analysts and brokers also said some were cashing out of a stock that is up about 25 percent in 2015, the best performing company in the Swiss blue-chip index.

Credit Suisse shares surged more than 6 percent last week on the back of its results and a plan to overhaul its strategy under new CEO Tidjane Thiam.

Zurich-based UBS, Switzerland’s biggest bank, published earnings for the three months to June 30 a day ahead of schedule to counter “incorrect and misleading information” in a Sunday report by Swiss weekly paper Sonntagszeitung.


The earning’s highlight was the bank’s capital position, to which UBS has tied its dividend payout, analysts said.

UBS bolstered its capital cushion, a measure of a bank’s ability to withstand a crisis, to 14.4 percent of risk-weighted assets from 13.7 percent.

It plans to return at least half its profits to shareholders if it maintains capital of at least 13 percent under global rules and 10 percent when applying its own stress tests.

“With this comfortable capital position, even if going forward there are stricter capital requirements, I think UBS is well-positioned to pay attractive dividends and grow the business,” said Vontobel analyst Andreas Venditti, who has a ‘buy’ rating on the stock.

The bank said it could recognize tax benefits of roughly 1.5 billion francs in the second half of the year due to a revaluation and an extension of the forecasting period. These are linked to financial crisis losses.

UBS’s profit in the second quarter a year ago was hit by almost $300 million to settle claims that the bank helped wealthy Germans dodge taxes.

UBS’s private bank, the biggest in the world by assets, posted net new money growth of 8.4 billion francs when adjusted for outflows that UBS deemed not profitable for the bank.

Overall net new money, a key indicator of future revenue in wealth management, was 1.8 billion francs.

“Even if we take the adjusted net new money figure, then it would not be as good as Credit Suisse,” Becker said.

The logo of Swiss bank UBS is seen at the company's headquarters in Zurich February 10, 2015. REUTERS/Arnd Wiegmann

UBS CEO Ermotti said the bank was going into the third quarter with “good momentum”.

“Every business in every region delivered a solid performance, demonstrating the resilience and diversification of our earnings and the strength of our business model,” Ermotti said in a call with analysts.

However, he flagged seasonal difficulties linked to the third quarter, which is often a quieter three months, as well as geopolitical and macroeconomic hurdles.

Additional reporting by Rupert Pretterklieber; Editing by David Clarke

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