The global wealth manager says it will review its risk procedures following the impact of the Archegos Capital implosion
The collapse of Archegos Capital continues to cause ripples through the financial services world.
Global banking group UBS posted its latest results Monday with investors surprised at a US$774 million dent in income caused by exposure to the failed family office. A further $86m impact is expected in the second quarter from ongoing exposure.
UBS’s revenues were looking good thanks to strong derivatives and cash equities but the Archegos damage resulted in drop of $554 million in its global markets business.
However, the group still posted a $1.82 billion quarterly profit, better than was expected as wealth management income increased.
While the Swiss-based banking group’s impact from Archegos was far smaller than the $5.5 billion hit for Credit Suisse, it says it will be assessing how to avoid similar risks going forward.
“We are all clearly disappointed and are taking this very seriously,” UBS chief executive Ralph Hamers said. “A detailed review of our relevant risk management processes is underway and appropriate measures are being put in place to avoid such situations in the future.”
Weathering all seasons
Hamers said that the firm’s strong financial position means it has the ability to weather all seasons.
He said that the start of 2021 provided a dynamic market environment.
“This was evidenced by the continued net inflows that helped our invested assets across wealth and asset management grow by over 100 billion dollars to 4.2 trillion. This, together with favorable market conditions and improved investor sentiment, contributed to positive results in the first quarter of 2021.”
Looking ahead, UBS remains optimistic but also notes concern around COVID infections and other factors, such as geopolitical tensions, that may harm global economic recovery.
While the firm says that higher asset prices should benefit recurring fee income in its asset gathering business, the continued uncertainty about the environment and economic recovery could affect both asset prices and client activity.
