Its A Hard Choc Life

UBS reported weaker than expected profit

Image source:

What's going on?

Switzerland can boast about its confectionery, sure, but it might not want to shout about its banking giant: UBS reported weaker-than-expected 2019 profit on Tuesday, and its shares melted 5%.

What does this mean?

Choppy market conditions, weak client activity, and tough competition from US rivals saw UBSs profit from its investment banking business halve in 2019. And with negative interest rates in Europe which limit how much money the bank makes from loans its perhaps no wonder the Swiss giant is so focused on the rich people (including half the worlds billionaires) in its flagship wealth management business.

That strategy seems to have paid off so far, with wealth managements profit proving more resilient than investment banking and climbing 4% from a year ago. UBS is now hoping to cut costs in that area, in an effort to hit 10-15% profit growth this year. The bank may want to focus on retaining big spenders first, mind you: its clients pulled almost $5 billion out of the banks wealth management division toward the end of 2019…

Why should I care?

The bigger picture: The grass really is greener.
UBS reduced its overall profit targets for 2020, and its not alone in doing so in this era of negative interest rates. Other European banking giants, like Credit Suisse, Deutsche Bank, and UniCredit, have recently dialed back their ambitions and cut thousands of jobs all while US rivals post record profits.

Zooming out: Low rates, low spirits.
UBS has been hit hard by the Swiss National Banks ultra-low interest rate policy, which has interest rates entering their fifth year in negative territory. British banks may be watching nervously: after disappointing data showed the UK economy shrank in November, investors are now expecting the British central bank to cut interest rates by the end of this month. And while that might stimulate the economy, it doesnt bode too well for British banks profitability

Originally posted as part of the Finimize daily email.

The top 2 financial news stories in 3 minutes. Join over one million Finimizers

Read next

Trim Pickings

Sign up to Finimize

Get the two most important global financial news stories each day. Sent at midnight UK time.

Get started with one email a day

The top financial news stories in 3 minutes.