UBS, Credit Suisse Boost Earnings After Strategic Shift
July 28 2017 - 4:33AM
Dow Jones News
By Brian Blackstone
ZURICH--Swiss banking giants UBS Group AG and Credit Suisse
Group AG posted better-than-expected profit last quarter,
suggesting their bets that managing money for well-heeled clients
is the right path for steady returns have paid off despite an
uncertain outlook.
However, investors took a mixed view of the results. Credit
Suisse share price increased early Friday while UBS's slid amid
concerns over margins in its wealth management division despite the
overall profit rise.
The results Friday have broader implications for Switzerland's
banking sector which makes up a significant chunk of the country's
economy and jobs. Beset for years by negative interest rates, hefty
legal settlements and bumpy strategy changes, the sector appears to
have turned a corner, although a vigorous recovery isn't at hand
yet.
UBS said its net profit rose 14% during the second quarter to
1.17 billion Swiss francs ($1.21 billion), as its wealth management
unit saw 7.5 billion francs in net new money. Credit Suisse posted
net income of 303 million francs, above market forecasts and
compared with a year-earlier profit of 170 million francs.
Credit Suisse's delivered a "strong set of results against weak
expectations," said analysts at Morgan Stanley, adding that the
outlook for the bank's risk-weighted assets "needs
clarification."
UBS meanwhile, "delivered a relatively soft/mixed set" of
results last quarter, said analysts at Baader Helvea Equity
Research. Although many of the numbers were in line with
expectations and wealth management saw net asset inflows, "the
market will once again raise concerns" about gross margins in
wealth management, they wrote.
UBS shares were down 3.7% in early trading. Credit Suisse shares
were up nearly 2%.
UBS and Credit Suisse have in recent years turned their focus to
wealth management and scaled back investment banking, which can be
quite profitable but is also volatile and costly to operate. UBS
started this process years ahead of Credit Suisse, which is midway
through a three-year strategic program launched by Chief Executive
Tidjane Thiam.
"Our focus on the global wealth management opportunity is paying
off, with growing net new assets and record global assets under
management," Mr. Thiam said.
The prospects for UBS, Credit Suisse and other Swiss banks are
key to the Alpine country's economy.
Although the number of banks has pared back sharply in the past
20 years, the financial sector still generates--directly and
indirectly--about 13% of Swiss gross domestic product, according to
a study by BAKBASEL.
Write to Brian Blackstone at brian.blackstone@wsj.com
(END) Dow Jones Newswires
July 28, 2017 04:18 ET (08:18 GMT)
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