UBS Group AG’s newly combined wealth-management business and investment bank are helping Chief Executive Officer Sergio Ermotti boost growth after investors questioned the lender’s commitment to higher returns.
The private banking unit — which counts many of the world’s billionaires among its clients — took in more fees and interest income in the second quarter while bringing down costs, even as UBS unexpectedly saw money leave the firm.
At the investment bank, surging equities and foreign-exchange trading helped the unit led by Andrea Orcel beat estimates.
Ermotti said UBS has begun to cut costs in wealth management following the merger of the U.S. and international division into one super-unit that manages about $2.4 trillion. While the business is producing steady profits, the lender rejigged financial targets this year after investors argued Ermotti should do more to improve returns after the shares languished.
UBS shares rose the most since April after the results were released on Tuesday, gaining as much as 4.2 percent in Zurich.
“Higher quality revenue streams in global wealth management and the ability to generate capital in unfavorable market conditions bodes well for the share price,” Tom Hallett, an analyst at Keefe Bruyette & Woods Inc. in London said by email. “The prospect of further capital return is likely.”
Higher profit at global wealth management helped compensate for the surprise withdrawal of assets by clients, including about 9 billion francs ($9.1 billion) related to tax-related withdrawals in the U.S. and a corporate employee share program. It’s the first time since the end of 2016 that the bank has lost assets on a net basis.
To benefit from the same synergies as U.S. rivals — with pooled infrastructure and clientele — Ermotti in January tasked Tom Naratil, head of the U.S. wealth business, and Martin Blessing, former chief executive officer of Commerzbank AG, with the merger. The unit is now known as global wealth management, after the surprise departure of Juerg Zeltner.