UBS delivered strong third-quarter results with reported profit before tax (PBT) up 37% year over year (YoY) to CHF 1,668m and adjusted2 PBT up 15% to CHF 1,733m. Cost/income ratio of 77% was down 6 percentage points YoY; on an adjusted2 basis, it was down 3 percentage points to 76%.
Net profit attributable to shareholders was CHF 1,246m, up 32% from the third quarter of 2017. Adjusted2 return on tangible equity (RoTE) excluding DTAs3 was 15.7% for the quarter, a 2.4 percentage point increase YoY.
Global Wealth Management’s PBT increased by 3% YoY to CHF 932m, with income and expenses both increasing by 2%. Recurring net fee income and net interest income both increased YoY on a new high for invested assets, further progress on mandate penetration, as well as increased net interest margin on deposits and higher loan volumes, while transaction-based revenues declined on lower client activity. Personal & Corporate Banking PBT was CHF 413m, as growth in recurring net fee income offset the ongoing pressure from the negative interest rate environment; net new business volume growth remained strong.
Asset Management reported PBT of CHF 120m, as the positive effects of higher invested assets partly offset the impact of a prior-period business sale and pressure on margins; invested assets rose to CHF 815bn, the highest in a decade. The Investment Bank delivered PBT of CHF 472m and an adjusted2 return on attributed equity of 21%, on strong revenue growth in Equities and Foreign Exchange, Rates and Credit (FRC) and continued resource discipline.
During the third quarter, UBS repurchased CHF 100m of its own shares, taking total purchases to CHF 650m for this year, above the 2018 target of CHF 550m. UBS’s capital position remains strong, with a CET1 capital ratio of 13.5%, a CET1 leverage ratio of 3.80%, a tier 1 (going concern) leverage ratio of 5.0%, and total loss-absorbing capacity of over CHF 80bn.
Beginning in the fourth quarter of 2018, UBS Group AG will change its presentation currency to US dollars following changes in the functional currencies of UBS Group AG (formerly CHF), UBS AG’s Swiss Head Office (formerly CHF) and its London Branch operations (formerly GBP). There will be no material changes to prior- period profit and loss or total equity attributable to UBS shareholders; future net interest income is expected to increase by around $0.3bn annually from 2019.
UBS expects to remeasure DTAs in the US and Switzerland in the fourth quarter of 2018, and offer new guidance on deferred tax recognition in the income statement at that point, with limited expected net impact on net profit after tax, IFRS equity, and CET1 capital.