UBS Q2 Profit Down; Difficult Conditions Continue; Yet Stock Rises

(RTTNews) - Swiss banking giant UBS Group AG (UBS) reported Friday a 14 percent decline in second quarter profit with weakness in net interest income. Looking ahead, the company said the difficult conditions continue to persist, yet the firm is well positioned to benefit from even a moderate improvement in conditions. UBS shares were gaining around 3 percent in the morning trading in Zurich.

For the second quarter, net profit attributable to shareholders declined to 1.034 billion Swiss francs from last year's 1.209 billion francs, with earnings per share decreasing to 0.27 francs from 0.32 francs in the prior year.

Adjusted profit before tax was 1.672 billion francs, up slightly on the second quarter 2015 when market conditions were more favorable, particularly in Asia.

UBS' operating income for the quarter declined to 7.404 billion francs from 7.818 billion francs last year. Net interest income for the quarter dropped 22 percent year-over-year to 1.164 billion francs. Net fee and commission income for the quarter was down 7 percent to 4.087 billion francs. Net trading income, however, grew 15 percent to 1.89 billion francs.

As of 30 June 2016, the bank achieved its previously announced target of 1.4 billion francs of net cost savings, making progress toward the 2.1 billion francs 2017 year-end target.

UBS said it is taking responsible measures to save costs across the firm in light of the current challenging environment.

UBS maintained its strong capital position, with a fully applied CET1 capital ratio of 14.2 percent and a fully applied CET1 leverage ratio of 3.4 percent.

Sergio Ermotti, Group Chief Executive Officer, said, "We achieved this strong result by helping our clients navigate continued difficult market conditions, while staying disciplined on risk and further reducing cost. UBS remains in a solid position with strong capital, strategic clarity and a well-diversified business model."

Looking ahead, UBS noted that sustained market volatility, underlying macroeconomic uncertainty and heightened geopolitical tensions, as well as the impact of the UK referendum vote to end EU membership, continued to contribute to client risk aversion and generally low transaction volumes. These conditions are unlikely to change in the foreseeable future.

UBS shares are currently trading at 13.73 francs, up 3.31 percent.