UBS Q3 Profit Before Tax Rises; Warns On Interest Rates

(RTTNews) - Swiss banking giant UBS Group AG (UBS) reported Friday an increased pre-tax profit for the third quarter despite weakness in net interest income. Net profit, however, decreased on the absence of last year's hefty tax benefit.

Looking ahead, UBS said it is unlikely that the underlying macroeconomic uncertainty and geopolitical tensions that causes client risk aversion and low transaction volumes will change in the foreseeable future. Also, lower-than-anticipated and negative interest rates still present considerable headwinds.

Switzerland's new bank capital standards and the proposed further changes to the international regulatory framework for banks is expected to result in increasing capital requirements and costs, but the bank said it is ready to deal with these challenges and to benefit from even a moderate improvement in market conditions.

For its third quarter, pre-tax profit increased 11 percent to 877 million francs from 788 million francs a year ago. Adjusted profit before tax of 1.30 billion francs climbed 33 percent year-on-year.

The company said this performance was achieved despite sustained economic and geopolitical uncertainty, persistently low client activity and subdued primary market issuance.

Net profit attributable to shareholders was 827 million Swiss francs or 0.22 franc per share, 60 percent lower than last year's 2.07 billion francs or 0.54 franc per share. The prior-year results included a tax benefit of 1.30 billion francs.

Operating income in the quarter edged down 2 percent to 7.029 billion francs from 7.170 billion francs last year. Net interest income declined 4 percent to 1.78 billion francs.

Net fee and commission income was down 1 percent, while net trading income improved 3 percent from last year.

As of September 30, 2016, UBS achieved 1.5 billion euros of annualized net cost savings, making progress toward the 2.1 billion euros 2017 year-end target.

On its capital position, UBS said it has a fully applied CET1 capital ratio of 14.0 percent and a fully applied CET1 leverage ratio of 3.45 percent.

On the NYSE, UBS shares settled at $13.98 on Thursday, up 1.53 percent. In the extended trading, it lost 0.68 percent.