Important Return Target Deferred By UBS

Important Return Target Deferred By UBS

A key earnings target of UBS was deferred by the Swiss bank by one year due to demands to keep additional capital. This undermined results for the third quarter, which surpassed expectations.

The bank revealed earlier that it was reducing its staff by 10,000, reduce spending and set a 2015 deadline for withdrawing from its fixed income business. These efforts would provide the bank with a 15 percent return on equity by 2015. However, regulatory requirements frustrated these efforts.

Trading of foreign exchange by the bank would be reviewed following allegations of manipulation in the foreign exchange market. The review will form the basis for actions that will be implemented by the bank.

A temporary fifty percent top-up capital was imposed by the regulator of Switzerland on the bank to provide a buffer against risky assets. This will allow UBS to have sufficient capital to manage possible costs of compliance issues, legal probes, and other risks.

Net profit for the third quarter reached 577 million Swiss francs, which reversed the loss the bank incurred during the same period a year ago. It surpassed the 537 million francs expectations of analysts.

However, the moneyed clients of the bank stayed away from trading during the fourth quarter due to debt issues in the US and Europe. The situation affected the flagship bank of UBS, which was a major player in the strategy of the bank after the overhaul.

Although four of the biggest banks in the United States surpassed expectations of analysts, this success provided a façade on less-than-desirable revenue growth. JPMorgan Chase & Co and Citigroup Inc did not show any significant improvements due to some issues that the two banks were facing.

Credit Suisse let down investors with its plan of reducing interest rate trading following a decline in the third quarter profits and revenues of its investment bank. The Deutsche Bank also posted a drop of 98 percent in its pre-tax profit for the quarter to around 18 million euros. This resulted from a decline in its trading income and increase in litigation provisions.

The revenue of UBS went down by 0.5 percent in the quarter, mainly due to lower investment banking income.

Posted by James Fried on Wednesday October 30 2013, 4:24 AM EST. Ref: Reuters. Link. All trademarks acknowledged. Filed under Featured News, Finance. Comments and Trackbacks closed. Follow responses: RSS 2.0