UBS Takes Sudden $774 Million Archegos Hit, Overshadowing Q1 Revenue Beat
“We’re all clearly upset and are taking this very significantly,” UBS Chief Government Ralph Hamers stated of the loss in its prime brokerage enterprise associated to the U.S. shopper’s default. Whereas the shopper was not named, it’s broadly understood to be Archegos.
“An in depth overview of our related danger administration processes is underway and applicable measures are being put in place to keep away from such conditions sooner or later,” he stated.
UBS shares have been indicated down 1.15% in pre-market buying and selling exercise.
The financial institution, which has hitherto acquired little scrutiny over its involvement in Archegos and had beforehand declined to touch upon any associated positions, stated on Tuesday the income hit to its prime brokerage enterprise had decreased web revenue by $434 million within the first quarter.
Nonetheless, web revenue of $1.824 billion for the primary three months of 2021 overshot median expectations for $1.591 billion in a ballot of 20 analysts compiled by the financial institution.
UBS additionally posted a greater than anticipated first-quarter pre-tax revenue, as will increase over the frenzied buying and selling and bumper outcomes achieved throughout the begin of the coronavirus disaster final yr helped offset the hit from Archegos.
Hamers, who took over from long-time boss Sergio Ermotti in November, was employed to assist enhance the financial institution’s digitalisation efforts after a profitable stint doing so at ING.
However his begin at UBS, broadly lauded as a chance to prime the financial institution for a extra tech-centred future, has been difficult by a Dutch legal investigation into his position in cash laundering failings at ING.
Hamers plans to unveil new strategic initiatives when he speaks to analysts at 0800GMT on Tuesday, centered round making UBS a quicker and extra client-driven “digital native” agency centered on sustainable investing.
A simplification of its setup and new digitalisation efforts ought to assist generate roughly $1 billion in gross financial savings per yr by 2023, the financial institution stated, which is to be reinvested into progress initiatives.
The financial institution additionally carved out a brand new executive-level position of Chief Digital and Info Officer, selling group head of expertise Mike Dargan in a transfer Hamers stated would assist the financial institution obtain its strategic ambitions within the digital and expertise area.
UBS has taken a again seat in monetary headlines over latest months, after a slew of painful missteps at its nearest rival Credit score Suisse prompted losses, sackings and probes at Switzerland’s No. 2 financial institution.
Credit score Suisse has suffered a greater than $5 billion hit from the Archegos debacle, which triggered losses amongst a swathe of worldwide banks and a fireplace sale of shares when it defaulted on margin calls in late March.
“In view of the sturdy Q1 outcomes we felt it was not required (to reveal our losses associated to Archegos) on the time (the default was first revealed),” Hamers stated in an interview with Bloomberg TV.
The financial institution has no plans to ditch its prime brokerage enterprise following the debacle, he added.
It had exited all remaining positions in April, the financial institution stated in an announcement, and would recognise associated losses within the second quarter that are “immaterial for the group”.
Taking a cautious method in direction of the second quarter, the financial institution stated it anticipated shopper exercise ranges to return down from the highs seen within the first three months of the yr, partially offset by a lift in recurring charges it generates off managing shopper investments because of greater asset costs.