– Building on client connectivity through advice, solutions and thought leadership in a dynamic environment: Our clients continued to put their trust in us and benefitted from the full spectrum of our business mix and geographical diversification. This, together with favorable market conditions and investor sentiment, led to higher recurring revenues YoY, while strong client activity drove transaction income, as well as an increase in lending across our businesses.
– 1Q21 financials: PBT was USD 2,298m (up 14% YoY), including net credit loss releases of USD 28m. The cost/income ratio was 73.8 %, 1.5 percentage points higher YoY. Operating income increased by 10 % YoY, while operating expenses increased by 8%. Net profit attributable to shareholders was USD 1824 million (up 14 % YoY), with diluted earnings per share of USD 0.49. Return on CET1 capital1 was 18.2 %. The default by a US-based client of our prime brokerage business resulted in an impact on net profit attributable to shareholders of USD 434 million.
– Our strong capital position supports growth and shareholder returns: The quarter-end CET1 capital ratio was 14.0 % (guidance: ~13 %) and the CET1 leverage ratio was 3.89 % (guidance: >3.7 %), both up QoQ. We paid the 2020 ordinary dividend of USD 0.37 per share in April 2021 (USD 1.3bn) and we repurchased USD 1.1bn of shares year-to- date. We will resume repurchasing shares shortly.
– Unlocking the power of UBS: We have unveiled our purpose statement: Reimagining the power of investing. Connecting people for a better world. Our purpose – together with our new strategic framework consisting of our vision, client promise, strategic imperatives, and sustainability commitments – maps out the next steps in our firm’s journey.
Ralph Hamers, UBS’s CEO said: “In the first quarter of 2021, our clients benefited from our broad capabilities, geographic reach and connectivity. They continued to put their trust in us and looked to UBS for advice, solutions and thought leadership in 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. All in all, we saw record activity across our client franchises, resulting in operating income being up 10%, profit before tax up 14%, and net profit attributable to shareholders up 14%, compared with the first quarter of 2020 which was strong in itself.
However, our first quarter results also factored in a loss related to the default by a single US-based prime brokerage client. We are all clearly disappointed and are taking this very seriously. 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. This never impeded our ability to serve our clients. We were still able to increase our CET1 capital ratio to 14% and deliver a return on CET1 capital of 18%. Our Investment Bank fully absorbed this loss, yet still delivered a 13% return on attributed equity, which would have been in excess of 30% had it not been for this incident.
Our financial strength and ability to weather all seasons, together with our unique positioning as the largest truly global wealth manager, enable us to look to our future with confidence. In an ever-evolving world, we, too, must continue to improve and adapt. That’s why I’m proud to unveil our new strategy today. It all starts with our purpose, our why: Reimagining the power of investing. Connecting people for a better world.
Our purpose and strategy – underpinned by a newly defined vision, our client promise, and five strategic imperatives – outline the actions we’re taking to unlock the power of UBS and evolve into a more client-focused, more agile, more digital firm. A firm that puts a personalized, relevant, on-time and seamless client experience and sustainability at the center of everything we do.”
Investor sentiment remained positive in the first quarter of 2021, helped by the strong rebound in economic activity and greater optimism regarding the further recovery, supported by mass COVID-19 vaccination campaigns around the globe. Significant fiscal stimulus, notably in the US, along with the prospect of continued accommodative monetary policy, contributed to generally more positive views on the timing and extent of a sustainable economic recovery.
However, economic, social, and geopolitical tensions remain, raising questions around the sustainability and shape of the recovery. Persistently high numbers of COVID-19 infections and hospitalizations, as well as lockdowns and similar measures imposed to control the pandemic, add to these existing concerns, as well as the severity and duration of the effects of the pandemic in certain economic sectors.
Our clients value strength and expert guidance, particularly in these uncertain times, and we remain focused on supporting them with advice and solutions. We expect our revenues in the second quarter of 2021 to be influenced by seasonal factors, such as lower client activity compared with the first quarter of 2021. Higher asset prices should have a positive effect on recurring fee income in our asset gathering businesses. However, the continued uncertainty about the environment and economic recovery could affect both asset prices and client activity.
With our balance sheet for all seasons and our diversified business model, UBS remains well positioned to drive sustainable long-term value for our clients and shareholders.
Information in this news release is presented for UBS Group AG on a consolidated basis unless otherwise specified. Financial information for UBS AG (consolidated) does not differ materially from UBS Group AG (consolidated) and a comparison between UBS Group AG (consolidated) and UBS AG (consolidated) is provided at the end of this news release.
1 Return on CET1 capital is calculated as annualized net profit attributable to shareholders divided by average common equity tier 1 capital.
2 New performance measure for our Global Wealth Management business: Beginning with the first quarter of 2021, we introduced net new fee- generating assets as a new performance measure for our Global Wealth Management business. The new measure captures the growth in clients’ invested assets from net flows related to mandates, investment funds with recurring fees, hedge funds and private markets investments, combined with dividend and interest payments into mandates, less fees paid to UBS by clients. The underlying assets and products generate most of Global Wealth Management’s recurring net fee income and a portion of its transaction-based income. Compared with net new money, net new fee-generating assets exclude flows related to assets that primarily generate revenues when traded in the form of commissions and transaction spreads, or borrowed against in the form of net interest income, and also exclude deposit flows that generate net interest income, and custody positions that generate custody fees. We will no longer report net new money for Global Wealth Management in our quarterly reports, but will continue to disclose this measure in our annual reports.