Tuesday, July 27, 2010

UBS, Deutsche Bank results reassure after stress tests

ZURICH/FRANKFURT: Results from two of Europe's top banks, UBS and Deutsche Bank reassured investors on Tuesday, July 27 following last week's European Union tests of the sector's ability to withstand financial shocks.

UBS, whose shares shot up 8.5 percent, benefited from its strength in equities and the fact that it had slowed the rate at which rich private customers withdrew funds.

Analysts said results at UBS showed Chief Executive Oswald Gruebel's tough restructuring strategy was producing results as the industry, including U.S. banks such as Bank of America Corp , Goldman Sachs and Citigroup Inc, grapples with the European sovereign debt crisis.

Clients drained a total of about 5 billion francs at the Swiss bank's wealth and asset management divisions, the lowest quarterly withdrawal UBS has experienced since it started to bleed assets at the start of 2008.

UBS chief Gruebel said he is confident the bank can stop client outflows this year

"The results are rather good. The rebuilding of the business is working successfully," said Helvea analyst Peter Thorne.

"We may start to see inflows at the end of this year, beginning of next."

UBS turned in a net profit of 2 billion Swiss francs ($1.90 billion), its third quarterly profit in a row after a string of losses following the financial crisis and a tax row. It was well above forecasts for 1.34 billion francs.

On a net profit level, Deutsche Bank outperformed posting 1.5 billion euros in net profit against a poll consensus of 1.04 billion euros, sending the 2 percent shares higher in early trade.

But compared with Swiss rival UBS Deutsche looked less impressive.

"Deutsche Bank's Q2 2010 results are disappointing versus consensus as well as UBS," analyst Andrew Lim said, pointing to a 44 percent drop in revenues from its fixed income currencies and commodities division.

Germany's top lender Deutsche posted second-quarter pretax profit in line with expectations, helped by sharply lower loan loss provisions amid weaker industry trends in investment banking.

Its corporate banking and securities division, run by 47-year old Anshu Jain, posted 779 million euros in pretax profit. These accounted for the lion's share of 1.52 billion euros ($1.96 billion) in group pretax earnings.

Deutsche performed less strongly than in the first quarter, but 16 percent stronger than during the year-earlier period, mirroring a trend among U.S. peers like Goldman Sachs and Morgan Stanley.

Deutsche Bank reiterated it expects to reach its 2011 target of 10 billion euros from its core businesses but added a note of caution.

"While some of the environmental variables are in line with or ahead of our assumptions, others have not yet reached the expected levels, particularly with respect to the normalisation of interest rates," the bank said in its quarterly report.

On Thursday, Credit Suisse posted second-quarter profit of 1.6 billion francs, helped by tax and accounting gains. - Reuters




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