ZURICH • UBS Group's fourth- quarter profit rose 11 per cent as a tax benefit offset a slump in earnings at the wealth management and investment-banking divisions. The shares dropped.
Net income rose 11 per cent to 949 million Swiss francs (S$1.32 billion) from a year earlier, boosted by a tax gain of 715 million francs, the Zurich-based lender said in a statement yesterday.
That beat the 911 million franc average estimate of seven analysts surveyed by Bloomberg. At the wealth-management unit, pretax profit dropped 47 per cent, while the investment bank reported a 63 per cent decline.
Chief executive officer Sergio Ermotti has reshaped the bank to focus on wealth management, shrinking the investment bank, a model that is being tested as market swings and a slumping oil price reduce client trading.
The Swiss bank said it was hurt by "very low levels of client activity and pronounced risk aversion" in the fourth quarter, with record low interest rates and a strong franc adding to "headwinds" this year.
"Operatively, it was an abysmal quarter in wealth management and investment banking," said Zuercher Kantonalbank analyst Andreas Brun, who downgraded UBS to market perform from outperform. "It's incomprehensible to me why UBS is alternating between perfect and awful."
UBS shares dropped 4.7 per cent to 15.89 francs at 9.08am in Zurich. They have declined about 19 per cent this year.
"The results are weak and given the start of the year, expectations are probably going to have to come down," said analyst Tomasz Grzelak of MainFirst Bank AG in Zurich who has a neutral recommendation on UBS. "Their capital position is supportive though and that's positive (as) it allows them to pay a more attractive dividend than expected."
UBS proposed a dividend for last year of 85 centimes per share, including a special payout of 25 centimes, up from 75 centimes for 2014.