UBS issuance drops despite increase in investment banking profits

UBS has been one of the second most active issuer globally (32,800 products) and sixth by market share (US$3.4 billion/3.1%) including non-retail products in Q2 20, despite a drop in issuance and sales year-on-year (Q2 19: 18,500 products/US$4.2 billion), according to SRP data.

SRP data also shows that UBS main market for structured products is the US where the Swiss bank has seen its structured product offer as a distributor dropping to 958 products in the US market during the second quarter of 2020 with a sales volume of US$2.5 billion, from 1,135 in Q1 20 worth US$4.43 billion.

The firm’s market share has also dipped to 15.60% from 18.74% in the previous quarter and 17.69% in the second quarter of 2019. UBS Financial Services has also slid to second place in terms of US distributor sales from the first quarter with Morgan Stanley Wealth Management overtaking.

In its home market, UBS has slipped out of the top 5 issuer ranking after a 30% drop in issuance (Q2 19: 478 products/ Q2 20: 331 products) and 86% fall in sales (Q2 10: CFH377m/ Q2 20: CHF52m), year-on-year.

According to SRP, the bank has distributed over 2.4 million live products across multiple markets such as Germany, its domicile Switzerland, USA, Taiwan, and Hong Kong SAR. The majority of the investments are wrapped as leverage certificates, investment certificates, warrants, registered notes (unlisted) and medium-term notes.

Significant underlyings include DAX, Volkswagen, Gold, Eurostoxx 50, DJ Industrial Average Index and Nasdaq 100.

The bank is led by chief executive officer, Sergio Ermotti (pictured) and reported that its profit before tax (PBT) is down 10% year-over-year standing at US$1.58 billion while operating income has also declined by two percent.

By division

Credit loss expenses stayed elevated at US$272m of which US$127m was accrued from an update to macroeconomic assumptions, US$75m came from overlays and re-measurements and US$70m resulted from credit impaired positions spread across the business.

The banks ongoing efforts to offset the damage inflicted by the Covid-19 pandemic include raising net income as well as loan growth which UBS hopes will compensate for higher liquidity expenses that were incurred to respond to the current environment and US dollar interest rate fluctuations. Risk-weighted assets went up to US$286.4 billion from US$262.2 billion in Q2 19.

The global wealth management division delivered a 1% year-over-year growth with PBTs of US$880m with solid growth in Apac and Emea.

Increased client engagement along with greater market volatility led to an eight percent jump in transaction-based income with net interest income climbing by six percent on higher lending and deposit revenues, the bank reported.

Personal & corporate banking reported a 41% loss in PBT of CHF229m driven by lower credit card fees and revenues from foreign exchange transactions, reflecting the effects of the pandemic on travel and leisure spending.

Asset management boasted soars of 27% and 10% in PBT of US$157m and operating income while invested asset figures rose by 12% from Q2 19.

Investment banking PBT went up by a whopping 108% on the previous year to reach US$1.32 billion. This was driven by higher global markets revenues of 34% due to higher volumes, volatility and credit spread movements, specifically in foreign exchange, rates and cash equities.

Click here to view the second quarter results.