UBS Posts Solid Profit Despite Challenges

UBS Posts Solid Profit Despite Challenges
By twicepix ( [CC BY-SA 2.0], via Wikimedia Commons

UBS AG (NYSE:UBS), the leading global financial institution in Switzerland reported strong financial results for the second quarter of the current fiscal year. The bank said its profit increased by 32 percent despite the challenges confronting it.

UBS Posts Solid Profit Despite Challenges

UBS reports net income

During the second quarter, UBS AG (NYSE:UBS) reported a net income of CHF 690 million or CHF 0.18 earnings per share, and its revenue was CHF 7.4 billion. The Swiss bank said its financial results remain strong despite recording a pre-tax charge of CHF 865 million for legal matters and other significant provision and impairment on financial assets as it continues to resolve its previous problems.

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Last week, UBS AG (NYSE:UBS) issued a preliminary earnings result and indicated that it reached a settlement agreement with the Federal Housing Finance Agency regarding its mortgaged-backed securities offering from 2004 to 2007. The agency alleged that major financial institutions including UBS did not reveal the real situation of the loans sold to investors during amid the housing crisis in the United States.

Investment banking unit to change focus

According to UBS AG (NYSE:UBS) it will change its investment banking unit’s focus from risky trading toward wealth management operations as part of its extensive operational restructuring efforts. During the three months period, its wealth management division generated the highest profit in four years excluding charges related to Swiss-UK tax agreement and restructuring costs. Its pre-tax profit increased by 11 percent to CHF 557 million. The wealth management unit attracted new investments of more than CHF 36 billion, an increase of 50 percent compared with the first half of 2012.

In a letter to investors, Sergio Ermotti, CEO of UBS AG (NYSE:UBS) said,  “Our underlying result illustrates the strength of our business model. This clearly indicates that we are successfully executing on our strategy to ensure our firm’s future success.”

UBS new plans

In addition, the Swiss bank also announced its plan to exercise its option to purchase SNB StabFund’s equity in the fourth quarter of 2013. UBS projected that the transaction will improve its BIS Basel III CET1 capital ratio by 70 to 90 basis points in the final quarter this year.

UBS AG (NYSE:UBS) also reported that its common equity Tier 1 increased by more than 1 percent to 11.2 percent during the period under Basel III accounting rules. The common equity Tier 1 measures the banks’ ability to confront any financial crisis.

The investment bank unit of UBS AG (NYSE:UBS) generated CHF 775 million profit before tax compared with CHF 977 million in the same quarter a year ago. The Swiss bank said its business operations remained challenged by the continued volatility in the global financial markets as investors worry about weak economic growth in the European region and the monetary policy in the United States.

UBS said, “Client confidence and activity levels could be impacted further by the continued absence of sustained and credible improvements to unresolved European sovereign debt and banking system issues and U.S. fiscal issues.”

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