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UBS FY'16 profit dips despite 'record' US wealth management performance

UBS Group AG touted the performance of its wealth management operations in 2016, despite seeing its full-year profit nearly halve from a year ago amid what it said were "very challenging market conditions and macroeconomic and geopolitical uncertainty."

The bank's net profit attributable to shareholders fell to CHF738 million from CHF949 million in the fourth quarter of 2015. EPS for the period dropped to 19 centimes from 25 centimes. The result included provisions for litigation, regulatory and similar matters of CHF162 million, as well as restructuring expenses of CHF372 million.

The group's pretax operating profit for the period amounted to CHF848 million, up from CHF234 million a year ago. Pretax operating profit in its wealth management business amounted to CHF368 million for the quarter, compared to the year-ago CHF344 million, while the amount in its wealth management Americas division rose to CHF339 million from CHF14 million. The investment banking division booked a pretax operating profit of CHF306 million, up from CHF80 million a year earlier, while pretax operating profit at personal and corporate banking rose to CHF374 million from CHF355 million.

Group net interest income was virtually unchanged at CHF1.76 billion, while net fee and commission income fell to CHF4.16 billion from the year-ago CHF4.22 billion. Net trading income rose to CHF946 million from CHF898 million a year earlier.

The group's full-year 2016 attributable profit fell to CHF3.31 billion from CHF6.20 billion a year ago. ROE dropped to 6.1% from 11.8% in 2015.

Looking ahead, UBS said it is on track to achieve its net cost savings of CHF2.1 billion by the end of 2017, after achieving CHF1.6 billion in savings as of 2016-end, up from CHF1.1 billion at 2015-end.

Group CEO Sergio Ermotti defended the bank's performance, saying it was able to achieve "solid results" despite a "very challenging market environment" in 2016 and noted the "record performance" by its wealth management Americas business, which reported a full-year pretax operating profit of CHF1.11 billion compared to CHF718 million in 2015.

"While we saw persistent client risk aversion and substantial cross-border outflows, we generated over CHF40 billion of net new money in our wealth management businesses," Ermotti said.

The group's fully applied common equity Tier 1 capital ratio was 13.8% as of 2016-end, compared to 14.0% as of Sept. 30, 2016, and 14.5% at the end of 2015.

The bank's board of directors intends to propose a 2016 dividend of 60 centimes per share, to be paid out of capital contribution reserves on May 10 to shareholders of record as of May 9. The amount is unchanged from 2015.