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ZURICH, April 27 (Reuters) – UBS on Tuesday posted a 14% rise in first quarter net profit, as the world’s largest wealth manager unveiled a $774 million revenue hit from the default of U.S. investment firm Archegos which took the shine off record high client activity levels.
First-quarter net profit of $1.824 billion overshot median expectations for $1.591 billion in a poll of 20 analysts compiled by the bank.
The bank posted better than expected pre-tax profit for the first three months of 2021, as surprise increases over the frenzied trading and bumper results achieved during the start of the coronavirus crisis last year helped offset the hit from Archegos first unveiled on Tuesday.
“We are all clearly disappointed and are taking this very seriously,” Chief Executive Ralph Hamers said of the loss in its prime brokerage business related to the U.S. client’s default. “A detailed review of our relevant risk management processes is underway and appropriate measures are being put in place to avoid such situations in the future.”
Hamers, who took over from long-time boss Sergio Ermotti in November, was hired to help boost the bank’s digitalisation efforts after a successful stint doing so at ING.
But his start at UBS, widely lauded as an opportunity to prime the bank for a more tech-centred future, has been complicated by a Dutch criminal investigation into his role in money laundering failings at ING. He said he plans to unveil new strategic initiatives on Tuesday.
UBS has taken a back seat in financial headlines over recent months, after a slew of painful missteps at its nearest rival Credit Suisse prompted a swathe of losses, sackings and probes at Switzerland’s No. 2 bank.
Credit Suisse has suffered a more than $5 billion hit from the Archegos debacle, which triggered losses amongst a swathe of global banks and a fire sale of stocks when it defaulted on margin calls in late March.
UBS, which has hitherto received little scrutiny over its involvement in Archegos and had previously declined comment on any related positions, said on Tuesday the revenue hit to its prime brokerage business had reduced net profit by $434 million in the first quarter.
It had exited all remaining positions in April, it said, and would recognise losses in the second quarter which are “immaterial for the group”. (Reporting by Brenna Hughes Neghaiwi; Editing by Michael Shields)
