UBS tightens investment banking belt as earnings slide continues
ZURICH: Swiss bank UBS is axing high-paying investment banking staff after a disappointing performance at the division prompted a 16 per cent slide in third-quarter net profit and put the group’s 2019 profit goals further out of reach.
Chief Executive Sergio Ermotti, credited for rapidly turning UBS around after the financial crisis, announced a further $90 million in expected annual cost savings at the investment bank on Tuesday, following a prolonged performance dip which Ermotti described as unsatisfying even given a tough market.
An earnings beat in its core global wealth management unit helped offset a 59 per cent adjusted profit decline in its investment bank, putting the group’s third-quarter net earnings of $1.05 billion ahead of analyst expectations.
Ermotti is running up against a number of headwinds in UBS’S core markets, as wealthy clients hold back from trading, negative rates eat into margins and investment banking activity remains muted.
The bank’s share price is down 16 per cent over the past year, hitting a six-year low in August and edging back towards the level it was when Ermotti took charge in 2011.
In its investment bank a fall in M&A work meant its advisory revenue fell 21 per cent, while equity and debt capital markets income were down 22 per cent and 15 per cent respectively. On the trading side equities revenue fell 7 per cent, while foreign exchange, rates and credit revenue was steadier with just a 1 per cent fall.
UBS said it expects to take restructuring expenses of around $100 million in the fourth quarter related to structural changes it is making to the business, run by Piero Novelli and Robert Karofsky.