ZURICH: UBS reported its highest annual pre-tax profit of the post financial crisis era on Tuesday, as lending to the world's ultra-rich and bumper trading volumes during the global pandemic triggered a surge in revenue.
The results handily beat forecasts, as investment gains and lower provisions for expected credit losses helped the bank to produce fourth-quarter net profit of $1.708 billion, nearly double the $966 million analysts expected for the quarter.
"Clearly, 2020 was a tough year all around for our clients, employees, our communities ... And that made us as UBS stand for stability, for confidence," Chief Executive Ralph Hamers, who took over from Sergio Ermotti in November, said.
Hamers, former CEO of ING, said a strong connection to clients helped the bank to bring in more than $100 billion in net new money across its wealth management and asset management business during the year.
"This has contributed to a record in invested assets in both businesses. So together, we're now over $4 trillion in total."
His start, hailed as an opportunity for UBS to pivot towards a more digital future, has been clouded by a Dutch criminal investigation into his role in ING's failure to crack down on money laundering when he headed the Dutch lender.
Hamers on Tuesday said he was confident in reaching a positive outcome in the Dutch matter, and remained undeterred in focusing on his new role at Switzerland's biggest bank.
Banks across the world have grappled with the uneven impact of the COVID-19 pandemic, as soaring stock markets boosted trading while national lockdowns had crippling economic consequences, leaving lenders braced for coming defaults.
Earlier this month, Wall Street investment banks reported blockbuster results, while consumer-oriented banks including Bank of America took a hit to business.
UBS, the world's largest wealth manager, derives the biggest chunk of its profits from advising and managing money for the world's rich, while also maintaining smaller global investment banking and asset management operations.
It conducts retail and corporate banking only in its home market.
That business model paid off in 2020, as its low-risk lending book -- comprised primarily of mortgages and loans to the wealthy, as well as some corporate and retail credits in prosperous Switzerland meant fewer losses than many high street rivals.
UBS also benefited from volatile and rising equity markets, which boosted investments and transactions.
"All of the divisions have come in ahead (of expectations) with particular strength from asset management and the investment bank," Citi analysts said in a note.
The bank also announced a new three-year share buyback programme of up to 4 billion Swiss francs ($4.50 billion).
UBS's shares were up 2.0% by 1206 GMT.
INVESTMENT BANK SURGE
Strong lending and trading amongst its wealthy and ultra-wealthy clients, coupled with a surge in investment banking activity, helped UBS to boost full-year net profit by 54% to $6.6 billion, meeting or exceeding all its financial targets.
Pre-tax profit of $8.226 billion was the bank's best since 2006, and every division besides its Swiss business achieved pandemic-spurred gains.
In the fourth quarter, wealth management profits rose 22% as growth in lending and high transaction levels helped to cushion the impact from falling and persistently low interest rates.
The bank brought in a net $21.1 billion in new client inflows, helping the division to increase invested assets to a record $3.0 trillion.
Investment banking pre-tax profits jumped to $529 million from a loss in the fourth quarter of 2019, thanks to double-digit revenue growth in both its trading and advisory businesses, and as it pared back costs.
In Switzerland, UBS' domestic business produced an unexpected increase in fourth-quarter profit, as the bank cut provisions it had set aside for expected credit losses by 20 million francs.
UBS as a whole ended the year with $694 million in net loan loss expenses.
The bank said its board intended to propose a dividend of $0.37 per share to shareholders, while it plans to buy back some $1.1 billion of shares this quarter, as it adjusts shareholder returns to favour buybacks more strongly than in the past.