Swiss bank UBS said it lost $ 774 million on trades in its prime brokerage unit due to the explosion of family office Archegos Capital, which resulted in otherwise robust first quarter results.
The blow was less than that suffered by its peers, which included a charge of $ 5.5 billion at the bank’s closest rival, Credit Suisse.
UBS on Tuesday reported first quarter net income of $ 1.8 billion, up 14% year-on-year, and comfortably ahead of analyst expectations despite the breach caused by Archegos, as promising markets have led to an increase in customer activity.
The bank said it had completely liquidated its exposure to Archegos, resulting in an overall reduction of $ 434 million in its quarterly net profits.
Despite the loss, the bank’s capital ratios improved, UBS said. The level one equity ratio of common stocks at the end of the quarter – a measure of bank capital to assets – was 14%, the bank said, ahead of forecast of 13%.
“We are all clearly disappointed and take this very seriously,” said Managing Director Ralph Hamers. “A detailed review of our relevant risk management processes is underway and appropriate measures are in place to avoid such situations in the future. It has never hindered our ability to serve our customers.
Excluding investment banking – where pre-tax profit fell 42 percent – profits rose across all of UBS’s other major divisions in the quarter. Assets invested on behalf of clients increased from over $ 100 billion in the first three months of 2021 to $ 4.2 billion.
Its flagship wealth management business posted a 16% increase in pre-tax profits to $ 1.4 billion. The boost came as clients turned to higher profits, but also an increasing use of leverage, UBS revealed, with loans to high net worth clients – including families. offices similar to Archegos – increasing to $ 219 billion.
The asset management division also benefited from higher fee income, reporting a 45 percent year-over-year increase in first quarter pre-tax profits to $ 227 million.
Performance fees climbed 153% in the division in the quarter, as markets restored government stimulus promises and the potential for vaccines to end economic restrictions from the coronavirus pandemic sooner than expected.
UBS’s Swiss universal bank also performed well, with pre-tax profit soaring 11 percent to $ 358 million.