UBS posted a $2bn net profit for the second quarter of 2021, leaping 63% from $1.23bn in the same period a year ago, and beating market expectations of $1.34bn.
Its global wealth management business posted profit-before tax of $1.3bn in the second three months of the year, a 47% increase year-on-year.
“Our clients invested more with us – in private markets and separately managed accounts. They sought our advice when dealing with industry changes coming out of the pandemic, to digitize their business models and gain scale,” said Ralph Hamers, UBS’s Group CEO, in a statement.
“They continued to seek yield with us and therefore actively engaged in structured products and alternative investments. Invested assets with a sustainability or impact focus saw growth as clients aligned their portfolios with their values,” he added.
Indeed, wealth management delivered profits in all regions during the second quarter 2021. Recurring net fee income surged by 30%, primarily driven by sales of higher average fee-generating assets, reflecting positive market performance. Transaction-based income rose 16% on “continued high levels of client activity in a constructive market environment”, the company said in a statement.
In Asia Pacific the wealth management business saw its profit before tax increase by $50m to $283m. Operating income rose $53m, or 8%, to $711m, mainly boosted by recurring net fee and transaction-based income.
Meanwhile, sustainable finance has become a firm-wide priority for UBS, the bank said, and the pandemic is sharpening the markets’ understanding of the importance of climate transition and certain social issues, and their impact on investment risk.
According to a recent UBS Asset Management survey of 450 institutional investors in Apac, Europe and the US, 75% of respondents said that their investments that integrate ESG criteria performed better than their traditional counterparts over the three-year period prior to the pandemic.
Three-quarters of respondents also said that the pandemic would accelerate the general interest in ESG and capital inflows into sustainable investments over the next three-to-five years.
Looking ahead, economic, social, and geopolitical tensions remain, raising questions around the sustainability and shape of the recovery, according to UBS. Continued localized outbreaks of Covid-19 infections and the spread of new variants, along with uneven vaccination rates, add to these existing concerns.
The severity and duration of the effects of the pandemic in certain economic sectors also remain unclear. The potential for rising inflation that could lead to more restrictive monetary policy has become an additional concern for the market.
“We expect our revenues in the third quarter of 2021 to be influenced by seasonal factors, such as lower client activity levels compared with the second quarter of 2021. Higher asset prices should have a positive effect on recurring fee income in our asset gathering businesses,” said UBS.
“However, the continued uncertainty about the environment and economic recovery could affect both asset prices and client activity levels.”