Exceeding expectations, Russia’s exposure decreases

UBS has beaten expectations for the first quarter of 2022 and said that they have further reduced their exposure to Russia.

The Swiss bank on Tuesday reported a net profit attributable to shareholders of 2.136 billion dollars, above forecasts prepared by the bank of 1.79 billion dollars.

It marks a 17% increase from $ 1.82 reported for the same period in 2021 and follows a drop in quarterly net profit to $ 1.35 billion at the end of the year.

The bank has previously described its market risk exposure to Russia as “limited”[ads1]; and said on Tuesday that it had reduced its exposure to $ 0.4 billion as of March 31, compared to $ 0.6 billion at the end of 2021.

In addition, they said that they had no significant exposure to Ukraine or Belarus, and that they do not conduct any new business in Russia or with Russia-based customers.

“Macroeconomic, geopolitical and market factors created a high level of uncertainty in the first quarter, with Russia’s invasion of Ukraine, covid-related restrictions and shutdowns, higher volatility, lower economic growth prospects and concerns about higher inflation and monetary policy response,” the bank said in a statement. a press release on Tuesday.

STOFF COFFRINI | AFP | Getty pictures

In a speech to CNBC’s Geoff Cutmore on Tuesday, UBS CEO Ralph Hamers said: “It’s pretty unpredictable out there.”

Here are some other key figures for the quarter:

  • Operating revenues were $ 9.36 billion, compared to $ 8.71 billion a year ago.
  • The return on tangible equity, a measure of profitability, was 16%, up from 14% a year ago.
  • The CET 1 ratio, a measure of banks’ solvency, was 14.3%, compared with 15% at the end of 2021.

The company’s shares traded almost 2% higher shortly after the markets opened in Europe.

The ECB is “a little late”

A key uncertainty on the horizon is how central banks will react to higher inflation – and this may have direct consequences for the banks’ results.

“The ECB will look closely at what [U.S. Federal Reserve] do so and the Fed is ahead of the ECB. But also, [it’s] a little late, let’s be honest. “So the ECB is a little late, too, because they do not want to … be faster than the Fed,” Hamers told CNBC.

The European Central Bank has said it will end its asset purchase program in June, but has not yet given an exact timeline for when it may raise interest rates.

“We expect a first rate hike towards the end of the year on the ECB’s side,” Hamers said.

Another problem for the European economy is whether the war in Ukraine will drag it into recession. European leaders have imposed tough sanctions on Russia and are considering further measures to punish the Kremlin, including a possible ban on oil imports.

Asked whether oil and natural gas sanctions against Russia could pose a risk to Europe, Hamers said: “Of Russian oil not so much, of Russian gas there is another – a much bigger challenge, and that is really because a large part[s] “Industries rely on gas as a basic commodity to make their product … so that’s what can cause the second-order effect specifically in the European economy.”

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