Phoenix In The Vault

UBS and Santander watch their profits soar

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What's going on?

Banking giants UBS and Santander shook the ash off their wings on Tuesday, soaring to new heights with their best second-quarter results in almost a decade.

What does this mean?

UBS had said this year was one of its worst for some time yet its second quarter saw the Swiss giant generate its highest second-quarter profit since 2010. There were some hiccups, however: income from its (relatively risky) investment banking businesses fell compared to the same time last year just like its US rivals’. And so did UBS’s income from managing money for the uber-rich, who looked to save money with lower-fee investments.

Santander the eurozones largest bank had its most profitable quarter in eight years. Thats mostly thanks to the growth of the companys Latin American business, which now contributes over half the banks profit, but it was also helped by job cuts which offset shrinking European earnings.

Why should I care?

For markets: Investors rated the updates.

UBS was quick to caution investors that the lower eurozone interest rates expected later this year would limit its income from loans and make it harder for the bank to turn a profit (sound familiar?). But that didnt put investors off UBSs stock rose 3%. Santanders shareholders, meanwhile, approved its purchase of the quarter of its business in Mexico it doesnt already own probably because of favorable Mexican central bank interest rates (8.25% to the eurozones zero). That may help explain why investors piled in and sent its stock 4% higher.

The bigger picture: The IMF will BRB.

On Tuesday, the International Monetary Fund a sort of bank for countries lowered its forecast for global economic growth this year yet again. Its reduced European growth forecasts were largely down to Germanys woes and might make the European Central Bank preempt the US Federal Reserves all-but-guaranteed rate cut later this month with one of its own on Thursday.

Originally posted as part of the Finimize daily email.

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