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UBS profits double
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November 23, 1999: 7:16 a.m. ET
Swiss bank 'confident' of full-year result; asset worries dog share price
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LONDON (CNNfn) - UBS, Europe's second-biggest bank, reported a doubling of earnings for the first nine months of this year Tuesday, but warned that investment conditions worsened in the latest quarter.
Although analysts said the bottom line numbers were better than generally expected, worrying signs at the bank's crucial private banking business spooked investors, driving the stock down 4 percent to 448 Swiss francs in Zurich.
Assets under management at the private banking division rose 6 percent for the nine months to 642 billion Swiss francs ($409 billion), but dipped 3 percent versus the half-year figure, and the company admitted the fall was mainly due to its investment performance. Private banking contributed 2.02 billion Swiss francs, 30 percent of the bank's pretax income at the nine-month stage.
"Some clients have left, and UBS is getting a smaller share of (investors') wallets," commented analyst Jim Hyde of Merrill Lynch in London. The bank's investment strategy has misfired, according to Hyde, and its traditional bias toward bonds rather than equities was also a damaging factor during the quarter.
Asset management unit PDFM, which has been beset by a poor investment record, "remains a worry," according to Hyde. He is maintaining his "accumulate" rating on the bank, and points to the bank's surplus capital as likely to lead to significant share buybacks.
Switzerland's biggest bank reported diluted earnings per share of 24.73 Swiss francs for the period, up from 12.20 francs in the same period last year. Net profit jumped to 5.18 billion Swiss francs ($3.3 billion), up 99 percent, although the bank admitted that the figures are not directly comparable with last year's numbers because of the distorting effect of the merger between SBC and UBS, which created the bank in its current form.
The bank warned that conditions for investing became tougher in the third quarter, although it did not break out specific numbers for the period. Investment bank Warburg Dillon Read has contributed 2.08 billion Swiss francs so far this year, "a result that significantly exceeded expectations." However, personnel costs in that unit soared by a fifth as performance-related bonuses were paid to successful traders.
UBS pronounced itself "confident about the results for full-year 1999," although the stock market appeared less certain.
These figures do not include any contribution from recently acquired Global Asset Management and Allegis Realty Investors.
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UBS
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