UBS UBS Group AG

By Margot Patrick 

UBS Group AG said its net profit nearly doubled in the third quarter on a surge in client trading and deal making, freeing up cash for dividends and share buybacks despite the coronavirus pandemic.

Tuesday's results highlight a growing divide between stronger and weaker banks in Europe as the pandemic hits some countries and business models harder than others. UBS's investment bank, like others, is benefiting from higher-than-usual customer activity while its wealth-management arm has gained net new money from clients to invest as global wealth rebounds from a spring rout.

Most of the Swiss bank's lending is to the world's rich and to Swiss households and businesses, areas that have held up relatively well in the pandemic. Many large U.S. and European rivals, in contrast, have taken hefty provisions on their consumer and corporate loans to reflect weaker economic outlooks than in Switzerland.

UBS said it set aside $1.5 billion to repurchase shares next year and has accrued $1 billion in cash for 2020 dividends. A delayed dividend from 2019 will be paid next month, UBS said. It had conserved the cash earlier this year after Swiss regulators asked banks to do so.

Net profit rose to nearly $2.1 billion from $1.05 billion a year earlier. Loan losses in the period were $89 million, lower than the $268 million and $272 million provisions taken in the first and second quarters, and well below the levels of many rivals.

The bank said the pandemic has been changing the way clients interact with the bank, bringing more of them online through mobile-banking applications and other platforms. Its wealthy customers have also been on an "intensified search for returns," UBS said in a presentation, with some increasing their investments in private markets, an area that includes buying stock and lending money to companies that aren't publicly traded.

UBS executives said their wealthy clients have been more active in stock markets and in making private-market investments, and have been looking at how to position their portfolios around next month's U.S. presidential election. In a recent investor survey, 72% said they were considering making changes before the election and 62% planned to make investment changes after the result. The coronavirus pandemic continued to be investors' top concern, according to the survey.

UBS's investment bank revenue jumped to $2.49 billion from $1.75 billion a year earlier, while global wealth-management revenue rose to $4.28 billion from $4.14 billion.

The bank's relatively insulated position has put it among Europe's healthiest banks in terms of returns on equity and its capital base. It has considered combining with smaller rival Credit Suisse, according to people familiar with the matter, and analysts expect it to be part of a burgeoning wave of banking consolidation in the region.

From Nov. 1, former ING Groep NV Chief Executive Ralph Hamers will take over from UBS's CEO of nine years, Sergio Ermotti. Mr. Ermotti on Tuesday said UBS has "all the options open" for more success under Mr. Hamers.

Under Mr. Ermotti, UBS shrank its investment bank and refocused on wealth management. It was regarded as a largely successful reinvention of the bank and the model has been copied by others, including Credit Suisse.

Because of its rosier prospects, UBS's share price has outperformed rivals this year and the broader European banks index.

Write to Margot Patrick at margot.patrick@wsj.com

(END) Dow Jones Newswires

October 20, 2020 08:00 ET (12:00 GMT)

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