ZURICH • UBS posted a 137 per cent rise in fourth-quarter net profit, as high levels of client activity helped the world's largest wealth manager end last year on a strong note.
Fourth-quarter earnings of US$1.71 billion (S$2.27 billion) far outstripped median expectations for US$966 million in a poll of 20 analysts compiled by the bank.
"Our strong 2020 results clearly demonstrate the true strength of our franchise," chief executive Ralph Hamers said. The former ING chief executive took over from long-time UBS boss Sergio Ermotti in November.
Strong lending and trading among wealthy clients, coupled with a surge in investment banking activity, helped Switzerland's biggest bank boost profits by 54 per cent for the full year.
It will propose a dividend of 37 US cents a share while the bank plans to buy back around US$1.1 billion of shares this quarter.
It will launch a new three-year buyback programme of up to four billion Swiss francs (S$5.98 billion) as well as wrapping up an existing one, as it adjusts shareholder returns to favour buybacks more strongly than in the past.
UBS derives the biggest chunk of its profits from advising and managing money for the world's rich while also maintaining smaller global investment banking and asset management operations.
It conducts retail and corporate banking only in its home market.
That business model paid off in 2020, as its low-risk lending book - mainly mortgages and loans to the wealthy, as well as a smaller portion of corporate and retail credits in its prosperous home market of Switzerland - suffered fewer losses than many high street peers.
The bank ended the year with US$694 million in net loan loss expenses. Every division besides its Swiss business saw pandemic-spurred gains over the full year.
Wealth management profits rose 22 per cent in the fourth quarter as growth in lending and continuously high transaction levels helped offset the hit from falling and persistently low interest rates.
The bank brought in US$21.1 billion in fresh client inflows from wealthy customers, helping the division grow invested assets to US$3.0 trillion.
Investment banking, meanwhile, saw pre-tax profit jump to US$529 million from a loss in the fourth quarter of 2019, thanks to double-digit revenue growth in both its trading and advisory businesses and cost cutting.
Banks across the world have grappled with the uneven impact of the Covid-19 pandemic, as soaring stock markets boosted trading while national lockdowns had crippling economic consequences, leaving lenders braced for coming defaults.
Earlier this month, Wall Street lenders focused on trading and investment banking posted blockbuster results while consumer-oriented banks, including Bank of America, took a hit to business.
In Switzerland, UBS' domestic arm posted a surprise rise in fourth-quarter profit as it cut provisions it had set aside for expected credit losses by 20 million francs.
Mr Edmund Koh, president of UBS Asia Pacific, said: "UBS Asia Pacific produced a record performance in 2020 where we doubled profit before tax to more than US$2 billion for the first time.
"UBS APAC contributed a quarter of our group's profit before tax."
• Additional information from The Straits Times