UBS’s $1.4bn Q3 profits almost double expectations; StanChart to boost wealth unit investment as profits beat forecasts

UBS posted a net profit of $1.4bn for the third quarter on Wednesday, nearly doubling analysts’ forecasts, as increased market volatility and cost-cutting measures boosted its trading business. 

Quarterly revenues rose to $12.3bn and global wealth management revenues grew slightly to $6.2bn, balancing lower income from reduced interest rates with increased fee income. Meanwhile, investment banking revenues surged 22 per cent to $2.6bn, driven by higher trading volumes amid volatile market conditions. 

“Against a market backdrop that, while constructive, still exhibited periods of high volatility and dislocation, our businesses delivered impressive revenue growth,” said chief executive Sergio Ermotti, noting “strong client momentum” particularly in the Americas and Asia-Pacific.

UBS returned to profitability in the first quarter of this year following its state-backed acquisition of Credit Suisse. The bank has completed initial client migrations in Luxembourg and Hong Kong, with further migrations planned for Singapore and Japan by year-end. 

However, uncertainty lingers for UBS as markets await the final requirements of new regulations proposed by Swiss authorities. The Swiss government is pushing for UBS and other key banks to hold more capital to avoid future crises such as Credit Suisse’s collapse, but UBS and banking lobbyists argue this could harm competitiveness.

Earlier this month, Swiss regulator Finma also directed UBS to strengthen its emergency and recovery plans, given the greater risks taken on with the Credit Suisse acquisition.

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Standard Chartered announced plans on Wednesday to double investment in its wealth management business while scaling back on retail banking, as it raised performance targets on the back of increased third-quarter pre-tax profits.  

The bank reported a pre-tax profit of $1.72bn for the three months to the end of September, exceeding analysts’ forecasts and more than doubling the $633mn profit from the same period last year. It said it now aims to return at least $8bn to shareholders by 2026, compared to $5bn previously.

Over the next five years, StanChart said it will invest $1.5bn in expanding its team of relationship managers and investment advisers as it shifts its focus towards affluent clients and international corporations, to be funded by cuts within its retail business. 

The changes would “further simplify our business and help us to generate higher-quality growth”, said chief executive Bill Winters in a statement.

StanChart’s shares rose 2.7 per cent following the announcement, adding to a 35 per cent increase this year.

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China’s largest banks reported increased profits for the third quarter on Wednesday, even as some face slimmer net interest margins.

Agricultural Bank of China led the pack with a 5.9 per cent rise in net profit, while Industrial and Commercial Bank of China, the world’s largest commercial lender by assets, announced a 3.8 per cent year-on-year profit growth. Bank of China, Bank of Communications and China Construction Bank recorded profit increases of 4.4 per cent, 1.2 per cent and 3.8 per cent, respectively.

However, three of the lenders reported a reduction in net interest margins; BoC’s NIMs declining from 1.44 to 1.41 per cent, with BoCom and CCB’s dipping also reporting dips.

Vivian Xue, a director at Fitch Ratings, said “We expect net interest margin pressure to persist in the fourth quarter, as the measures announced by the Chinese authorities to support the economy will likely add to pressure on bank profitability.”

She further added that “the effect of the mortgage rate cuts and loan prime rate cuts on NIM will be mitigated by reductions in reserve requirement ratios and deposit rates, but it is unclear whether they will be sufficient to revive credit demand”.

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Bank of America is considering litigation in response to a US Consumer Financial Protection Bureau inquiry into its handling of funds through the Zelle payment app, the bank disclosed in a regulatory filing on Tuesday. 

According to the bank’s filing, the CFPB has approached BofA to pursue either a resolution to the enquiry or move forward with an enforcement action. “The corporation is evaluating next steps, including litigation,” the bank said.

Zelle, launched in 2017 and co-owned by seven major US banks including BofA and JPMorgan, is facing increasing scrutiny from US lawmakers and regulators, including senator Elizabeth Warren, over a rise in fraud and consumer protection concerns. 

This article was updated after publication to correct the source of Standard Chartered’s funding cuts.