UBS AG, Europe's biggest banking company, reported record first-quarter profits Tuesday as higher fees for managing money for the rich helped offset a drop in earnings at its investment bank.
The Zurich company said profits rose 15% from a year earlier to $2.19 billion. The median estimate of 10 analysts surveyed by Bloomberg News called for UBS to post $2 billion of earnings.
In the first quarter its private bank generated net income of $12.8 billion, its second-highest total ever. However, the investment banking business lagged behind competitors, such as Deutsche Bank AG, as trading revenue slumped. Clive Standish, the chief financial officer at UBS, said markets weakened in March.
Peter Wuffli, its chief executive officer, has been expanding its investment banking operations in the United States and wealth management operations in Europe. Last year UBS spent $1 billion buying private banks to cement its position as the world's biggest wealth manager. It bought Charles Schwab Corp.'s market-making and institutional trading unit for $265 million, as well as Sauerborn Trust AG, which manages $7.8 billion for some of Germany's richest families.
"Investment banking was disappointing," said Matthias Grimm, a fund manager who oversees about $1.3 billion of European equities, including UBS shares, at Cominvest Asset Management in Frankfurt. "The revenues came in below expectations."
However, "private banking did well," Mr. Grimm said.
Pretax profits at UBS' private bank, which caters to people with more than $1 million to invest, rose 6%, to $764.2 million. Earnings at the investment bank fell 19%, to $1.08 billion. Profits at Wealth Management USA, formerly Paine Webber Group Inc., jumped 350%, to $120 million.
At the end of March, UBS had $1.36 trillion of managed assets. The customer assets managed by the private bank, which is headed by Marcel Rohner, 40, rose 5% from a quarter earlier, to $684.8 billion at the end of March.
The return on equity, a measure of profitability, jumped to 32.4% in the first quarter, from 25.5% three months earlier, as UBS bought back shares and increased profits. Citigroup Inc. reported a 20% return on equity.
UBS declined to give a profit forecast for this year.
- Bloomberg News
