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UBS Beats Expectations as HSBC Profits Plunge

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Rising interest rates will benefit commercial lenders like UBS this year.

Stefan Wermuth/Bloomberg


UBS

beat expectations in the first quarter, led by its trading division amid high market volatility. It’s unlikely that others will be able to follow suit.While the biggest Swiss lender managed to reduce its exposure to Russia following the invasion of Ukraine, its wealth management division suffered a 7% decline on a reduction in business from its clients in Asia.

Compare that with Asia-focused


HSBC

(ticker HSBC), where profits fell substantially in the first three months of the year. The rival bank was hit hard by potential defaults as the cost of living rises quickly for its customers. Its wealth business was also adversely affected by pandemic lockdowns in China.

UBS looks good by comparison. And while rising interest rates will benefit commercial lenders this year, the expected economic turmoil of continued war, Covid flare-ups and rapid inflation will make a lot of its business more difficult.

“The group held up well in a challenging environment and this will likely only become more evident with reporting of European peers,” Deutsche Bank analysts Benjamin Goy and Sharath Kumar Ramanathan wrote in a note on Tuesday. Still, “this set of results might not be a positive impulse for the stock today.”

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