UBS has reported 'an excellent year' with profit before tax up 29% to CHF5.3bn (US%.5bn) while delivering on its CHF2.1bn net savings program, according to the bank's 2017 full year results. Adjusted profit before tax in the investment bank remained broadly unchanged at CHF1.5bn with lower revenues in foreign exchange, rates and credit, mainly resulting from reduced client activity due to continued low market volatility, being broadly offset by increased revenue in equity capital markets and in equity derivatives. The adjusted return on attributed equity for the investment bank was 16%.
In 2017, the Swiss bank expanded its discretionary mandate solutions to 'meet specific client needs and preferences' and stressed its strong commitment to 'broadening our sustainable and impact investment offering'. 'We continue to develop innovative solutions to help our clients address the challenges of an increasingly complex financial world and to respond to their evolving needs,' stated the bank in its annual results report. 'We have material exposures to a number of markets, and the regional balance of our business mix also exposes us to risk.'
UBS said its investment bank's equities business is more heavily weighted to Europe and Asia, and within this business its derivatives business is more heavily weighted to structured products for wealth management clients, in particular with European and Asian underlyings.
'Turbulence in these markets can therefore affect us more than other financial service providers,' it said, pointing that approximately half of total long-term debt obligations had a variable rate of interest.'
The notional amount of these interest rate swaps was CHF60bn as of 31 December 2017. In the global retail structured products market UBS was the second most active issuer with 5,649 products excluding non-retail, flow and leverage marketed and the top overall seller with over US$14.4bn sold, according to SRP data. This represents a 62% increase year on year in terms of issuance (3,486 products launched in 2016) and a 94% increase in terms of sales (US7.4bn in 2016)
In Europe, UBS was the third most active issuer behind Vontobel and Leonteq, with 1,261 products and US$3.6bn in sales. In its home market Switzerland, the bank issued 1,051 products (mainly reverse convertibles) worth an estimated CHF2.7bn (US$2.8bn). In the US market, UBS was the most prolific issuer (by issuance) in 2017 with 3,373 products marketed worth US$3.3bn, compared to 2,015 products issued in 2016 which sold US$1.8bn. In Asia Pacific, the Swiss bank came fourth in terms of issuance with 1,994 products launched including non-retail, flow and leverage products which sold an estimated US$4.1bn.
The bank's wealth management business reported adjusted profit before tax of CHF2.8bn, an increase of 15% compared with 2016, driven by increases in all income lines coupled with effective cost control. Net new money was CHF51.1bn, reflecting an annual growth rate of 5.2%. Wealth Management Americas reported adjusted profit before tax of US$1.3bn, an increase of 8% compared with 2016.
Personal and corporate banking reported adjusted profit before tax of CHF1.7bn, a decrease of 4% compared with 2016, mostly due to lower net interest income reflecting the negative rate environment in Switzerland and higher funding costs, as well as higher expenses related to strategic and regulatory initiatives. Net new business volume growth for personal banking was a record 4%.
The bank's asset management business reported adjusted profit before tax of CHF525m, a decrease of 5% compared with 2016, primarily reflecting lower operating income. Invested assets reached a nine-year high of CHF776bn. Net new money inflows excluding money market flows amounted CHF48.1bn for the year. Adjusted profit before tax in the investment bank remained broadly unchanged at CHF1.5bn.
'Lower revenues in foreign exchange, rates and credit, mainly resulting from reduced client activity due to continued low market volatility, were broadly offset by increased revenue in equity capital markets and in equity derivatives,' stated the bank. 'The adjusted return on attributed equity for the Investment Bank was 16%.'
Throughout 2017 UBS kick-started several initiatives relating to its sustainable performance including the launch by the investment bank of a series of investment products aligned to the 17 UN Sustainable Development Goals (SDGs) which will allocate a pre-defined portion of proceeds as philanthropic contributions to its dedicated philanthropic UBS Optimus Foundation.
In Asia-Pacific, UBS partnered with Synpulse (now Strategy Data Exchange - SDX) to spearhead its actively-managed certificates (AMCs) platform, UBS Neo, across Asia Pacific (Apac). Earlier in the year, the bank sold its UBS Delta risk and performance analytics service to StatPro Group, a listed provider of cloud-based portfolio analysis and asset pricing services for the global asset management industry listed on the Alternative Investment Market (AIM) - a sub-market of the London Stock Exchange (LSE).
In April, UBS created new wealth management platforms and solutions incorporating the Americas under a new global co-head leadership structure with Christian Wiesendanger and Jason Chandler becoming co-head global investment platforms and solutions, reporting jointly to Tom Naratil, head of wealth management Americas, and Jürg Zeltner, global head of wealth management. Following the changes to its Americas team the head of structured solutions, Eric Glicksman, and the head of alternative investments, Jerry Pascucci, now report Chandler. In the US, the Financial and Regulatory Agency (Finra) filed an arbitration claim against UBS Financial Services for breach of its fiduciary duty, violation of industry rules and negligent supervision in relation to the sale of a structured note.
In Europe, the Swiss bank saw its head of ultra high net worth wealth management at UBS Wealth Management for Germany and Austria in Frankfurt, Axel Kilian, parting ways with the bank. In Asia-Pacific, UBS has appointed Hirofumi Takaku as head of equity derivatives structured sales, Asia-Pacific (Apac), and Stephane Petermann, former co-head of global equities derivatives trading Asia at Societe Generale, who joined as head of equity derivatives trading in the region, as part of the bank's efforts to bolster its equity trading and derivatives in the region.
“Our results this quarter provide more evidence that our business model works in a variety of market conditions,' said group chief executive officer Sergio P. Ermotti (pictured). 'One year into the acceleration of our strategy we are ahead of plan on execution. We will remain disciplined to deliver the best of UBS to our clients and fulfill our commitments to our shareholders.'
Click in the link to reads UBS 2017 annual report.
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