By Pietro Lombardi
--UBS posted its highest second-quarter net profit in almost a decade, beating expectations
--The investment bank unit surpassed expectations despite a 23% fall in adjusted pretax profit
--Adjusted pretax profit declined 12% at UBS's key global wealth-management unit
UBS Group AG /zigman2/quotes/206172872/composite UBS +0.96% exceeded expectations in the second quarter with its highest net profit for the period since 2010, helped by the better-than-expected performance of its investment bank unit and gains at the personal-and-corporate-banking business.
The results cap a tough period for the bank and follow a challenging first quarter, which Chief Executive Sergio Ermotti deemed one of the worst first quarters in recent history for wealth-management and investment banking. In June, one of its top economists angered Chinese securities professionals with a reference to Chinese pigs while discussing consumer prices. UBS is also facing the fallout of a fine of more than $4 billion in France for allegedly helping wealthy clients evade taxes.
Net profit for the second quarter rose to $1.39 billion from $1.38 billion a year earlier, the Swiss banking giant said Tuesday. Operating income was $7.53 billion, down from $7.64 billion a year earlier.
"In the second quarter we achieved the highest second-quarter net profit since 2010 and an improvement on an already strong second quarter of 2018," Mr. Ermotti said.
Analysts had expected UBS to report a net profit of $1.04 billion, according to a consensus forecast provided by the bank.
The results are good, although "driven by more volatile items, namely IB primary revenues and the corporate centre," Citi analysts said.
UBS shares trade 1.1% higher at 0735 GMT.
Adjusted pretax profit declined 12% on year at UBS's key global wealth management unit. Net new money was negative by $2 billion, due to tax-related outflow of roughly $5.1 billion in the U.S. Adjusted pretax profit at the investment-bank operation surpassed expectations despite a 23% fall. It rose 11% at the personal-and-corporate-banking division.
The bank warned that global growth has stabilized at a lower level and there are lingering risks related to political tensions. The interest-rate environment will continue to have a negative impact on net interest income, UBS added.
"Our regional and business diversification, along with higher invested assets benefiting recurring revenues, will help to mitigate this," it said.
Looking at the third quarter, "an improvement in investor sentiment and higher market volatility could help to offset the typical third quarter seasonality," it said.