For the second time this year, UBS Group AG’s investment bank is causing a headache for CEO Sergio Ermotti by outshining the business that investors really want to see do well.
More volatile markets were a boon for Andrea Orcel’s traders at the investment bank, helping the business beat expectations. That contrasted with the bank’s key wealth management unit, which posted rare net new money outflows and slightly missed profit estimates. The unit saw large outflows in the Americas.
Seven years after a sweeping revamp of the bank, whose tilt toward wealth management became a blueprint for rivals, Ermotti is overseeing one of the most stable lenders in Europe. But as the turnaround at peers gather speed, some investors have begun to ask whether UBS is doing enough to sustain its lead. That’s ramping up pressure to show better results from the merger of its wealth divisions into a super-unit that manages about $2.3 trillion.
The net new money outflow was the biggest surprise in the newly combined wealth management business, with outflows of CHF 9 billion in the Americas related to tax-related outflows in the US and a corporate employee share program. UBS added about CHF 19 billion in the first quarter.
Revenue from equities, foreign exchange and credit trading helped fuel gains at the investment bank as UBS benefited from similar trends to US rivals. The investment bank posted pretax profit of CHF 569 million, the Zurich-based bank said in a statement, beating the average estimate for CHF 397 million in a company-compiled survey. Global wealth management pretax profit was CHF 1.04 billion, slightly below forecasts.