San Francisco Frontiers - After turbulent year, UBS upbeat with eye on Asia

"We are starting 2023 from a position of strength," group chief executive Ralph Hamers said in an earnings statement.

Switzerland's largest bank posted better-than-expected fourth-quarter earnings, as its net profit soared 23 percent year-on-year to $1.65 billion.

And while its revenue for the three-month period shrank by eight percent to just above $8 billion, that too was above market expectations.

Analysts polled by the AWP financial news agency had expected to see UBS rake in $1.28 billion in net profit on revenues of $7.92 billion.

For all of 2022, UBS posted a net profit of $7.6 billion, up two percent from 2021.

"We delivered good full-year and solid fourth-quarter results in a difficult macroeconomic and geopolitical environment," Hamers said.

Analysts deemed the bank's performance as mixed, however, while its share price tumbled more than two percent in mid-afternoon trading to 19.44 Swiss francs.

- Investor sentiment hit -

The bank said the combined impact in 2022 of "persistent inflation, rapid central bank tightening, the Russia-Ukraine war, and other geopolitical tensions affected asset pricing levels and investor sentiment."

As with several large US investment banks posting results this month, the challenging climate and declining appetite for mergers and acquisitions took its toll on that part of UBS's business.

UBS said its investment bank's revenues shrank 24 percent in the fourth quarter as global advisory and market activities dwindled.

Its asset management revenues dropped by 31 percent due to decreasing net management fees, amid negative market performance and foreign currency effects, it said.

And its global wealth management division -- the historic heart of its business -- also saw revenues slip, although only by five percent in the final quarter of the year.

The losses there were offset by net interest income that soared 35 percent, mainly thanks to "an increase in deposit revenues, as rising interest rates led to higher deposit margins", UBS said.

Central banks have raised rates worldwide in efforts to tame runaway inflation.

- Credit Suisse effect? -

While the tricky macroeconomic and geopolitical conditions were expected to continue, UBS said it expected its first quarter of 2023 to be "positively influenced by seasonal factors, such as higher client activity levels compared with the fourth quarter of 2022."

It said it expected "higher interest rates to positively affect our net interest income, especially for the Swiss franc and the euro."

At the same time, the bank said "the easing of Covid-19-related restrictions in Asia Pacific is expected to contribute to generally more positive sentiment in that region, which we expect to translate into higher client activity levels over time."

Already last year, UBS pulled in $60 billion of new fee-generating assets in 2022, including $23 billion in the fourth quarter alone.

That stood in stark contrast to expectations for UBS's main Swiss rival Credit Suisse as it prepares to report results next week.

That scandal-plagued bank has already warned that it is bracing for a pre-tax loss of up to 1.5 billion Swiss francs ($1.6 billion) in the fourth quarter, due among other things to customers withdrawing capital.

Asked if UBS could attribute its asset boost to its rival's woes, Hamers insisted during an analyst call Tuesday that "it is not the primary driver of our inflow."

UBS is already the "largest wealth manager in Asia," he pointed out, insisting there were not many new clients to be gained.

E.Cruz--SFF