UBS earnings up, but shares slide as wealth unit struggles

UBS recorded a 19% increase in profit to $6.4 billion year-over-year in 2018, with the bank targeting a share buyback program of around $1 billion over the course of 2019.

However, despite strong earnings growth, the Swiss bank missed analyst forecasts with significant outflows from its wealth management business helping to drive its share price down more than 4% on Tuesday.

‘We've seen some normalisation in markets early in 2019, we will stay focused on balancing efficiency and investments for growth, in order to keep delivering on our capital return objectives while creating sustainable long-term value for our shareholders,’ UBS CEO Sergio Ermotti said.

‘We increased net profit by a billion or 25% to USD 4.9 billion, achieved a strong return on CET1 capital of 14.2%, and overdelivered on our capital return targets,’ he added.

Wealth management outflows at UBS

The Swiss lender reported around $8 billion in wealth management outflows in its fourth quarter, with the bank stating that lower invested assets will likely impact recurring revenues of its wealth and asset management unit.

However, the bank is hoping that losses will be offset by improvements in market levels and investor sentiment, as well as greater client activity.

Macroeconomic headwinds continue to batter UBS

The bank blamed an overall slowdown in global economic activity for it missing analysts’ expectations, with the Swiss lender saying that rising protectionism and trade disputes combined with increased volatility have hurt investor confidence in the second half of 2018.

The bank expects that negative sentiment to carry forward into the first quarter of 2019, with client activity likely to be impacted.

However, despite the slow start to the new year, the bank believes that it is ‘well-positioned to capitalise on global wealth creation’.

Speaking to CNBC on Tuesday, Ermotti said: ‘Further improvements in market levels, as well as improvements in investor sentiment and client activity would contribute to mitigating revenue and profit growth headwinds," the bank said in its statement.’