UBS loses $ 774 million in Archegos operations

Swiss bank UBS said it had lost $ 774 million in operations at its main brokerage unit related to the Archegos Capital family office explosion, which dragged otherwise solid first-quarter profits .

The success was less than that suffered by his peers, who included a $ 5.5 billion charge on Credit Suisse, the bank’s closest rival.

UBS reported first-quarter net profit of $ 1.8 billion on Tuesday, up 14% from a year earlier, and comfortably pushed analysts’ expectations despite the inconvenience caused by Archegos as boosted markets boosted the increased customer activity.

The bank said it had completely discontinued its exposure to Archegos, resulting in an overall reduction of $ 434 million in its quarterly net profits.

Despite the loss, capital ratios improved at the bank, UBS said. The equity ratio of first quarter equity (a measure of bank capital on assets) was 14%, the bank said, ahead of indications of 13%.

“We are clearly disappointed and take it very seriously,” said Ralph Hamers, chief executive. “A detailed review of our relevant risk management processes is being carried out and appropriate measures are being taken to avoid these situations in the future. That never hindered our ability to serve our customers. “

Excluding investment banking, where pre-tax profit fell 42%, profits rose in all other major UBS divisions during the quarter. Assets invested on behalf of customers increased by more than $ 100 billion in the first three months of 2021 to $ 4.2 million.

Its flagship wealth management business recorded a 16% increase in pre-tax profits to $ 1.4 billion. The boost was due to customers becoming higher commission-generating profits, but also to a growing use of leverage, UBS revealed, with loans to wealthy customers, including family offices similar to Archegos, which went increase to $ 219 billion.

The asset management division also benefited from higher commission income, which reported a 45% year-over-year increase in pre-tax first-quarter earnings to $ 227 million.

Yield commissions rose 153% in the division during the quarter as markets roared again with promises of government stimulus and the potential for vaccines to end the economic constraints of the coronavirus pandemic before than expected.

UBS’s Swiss universal bank also performed well, as pre-tax profits rose 11% to $ 358 million.