Exceeds expectations, reduces exposure to Russia

UBS has beaten expectations for the first quarter of 2022, saying it has further reduced its exposure to Russia.

The Swiss bank on Tuesday reported a net profit attributable to shareholders of $ 2.136 billion, over forecasts prepared by the bank of $ 1.79 billion.

It marks a 17% increase from the $ 1.82 reported for the same period of 2021, and follows a decline in quarterly net profit to $ 1.35 billion at the end of the year.

The bank has previously described its market risk exposure to Russia as “limited” and said on Tuesday it had reduced its exposure to $ 0.4 billion per year. March 31, compared to $ 0.6 billion at the end of 2021.

In addition, it said it had no significant exposure to Ukraine or Belarus and that it does not conduct any new business in Russia or with Russia-based customers.

“Macroeconomic, geopolitical and market factors created a high level of uncertainty in the first quarter, with Russia’s invasion of Ukraine, COVID-related restrictions and lockdowns, higher volatility, lower economic growth prospects and concerns about higher inflation and the monetary policy response,” the bank said in a statement. a message Tuesday.

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In a speech to CNBC’s Geoff Cutmore on Tuesday, UBS CEO Ralph Hamers said, “It’s pretty unpredictable out there.”

Here are some other key figures for the quarter:

  • Operating income came in at $ 9.36 billion against $ 8.71 billion a year ago.
  • Return on tangible equity, a measure of profitability, was 16%, an increase from 14% a year ago.
  • The CET 1 ratio, a measure of banks’ solvency, was 14.3% against 15% at the end of 2021.

The company’s share traded almost 2% higher shortly after the markets opened in Europe.

ECB is “slightly delayed”

An important uncertainty on the horizon is how central banks will react to higher inflation – and this may have direct consequences for banks’ performance.

“The ECB will look closely at what is [U.S. Federal Reserve] does, and the Fed is ahead of the ECB. But also, [it’s] a little late, let’s be honest. “So the ECB is also a little bit late because they do not want to … be faster than the Fed,” Hamers told CNBC.

The European Central Bank has said it will end its asset buying program in June, but has not yet given a precise timeline for when it may raise interest rates.

“We expect an initial rate hike towards the end of the year on the ECB’s side,” Hamers said.

Another question facing the European economy is whether the war in Ukraine will drag it into recession. European leaders have imposed harsh sanctions on Russia and are considering further measures to punish the Kremlin, including a possible ban on oil imports.

Asked if oil and natural gas sanctions against Russia could pose a risk to Europe, Hamers said: “Of Russian oil not so much, of Russian gas, it’s another – a much bigger challenge, and it really is because a large part[s] of industries rely on gas as their basic commodity to manufacture their product … so that is what can cause the second-order effect specifically in the European economy. “

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