Diversified business model
On May 5, UBS Group (UBS) reported strong quarterly profits in its Investment Banking division. The division reported profit before tax of 774 million Swiss francs, up from 425 million Swiss francs in the first quarter of the previous year. The adjusted profit before tax for the quarter stood at 844 million Swiss francs.
UBS concentrates on a diversified client-focused model, which paid off as a result of higher corporate activity in the US and Europe in the first quarter.
The division delivered 1.86 billion Swiss francs from its Investor Client Services division without increasing its risk profile. Overall, the division has benefited from strong client activity, higher market volatility that’s resulted in foreign exchange benefits, rates and credit, equity derivatives, and global financing services.
Corporate Client Solutions revenues rose to 801 million Swiss francs, mainly due to increased activity in equity capital markets, debt capital markets, and financing solutions. The division generated a higher-than-average adjusted annualized return of 46.2% on its attributable equity.
Investment Banking division
The Investment Banking division provides advice on fund-raising, mergers and acquisitions, and restructuring to corporate, institutional, and wealth management clients. The division also provides advisory services and access to international capital markets, cross-asset research, equities, foreign exchange, precious metals, and selected rates and credit markets.
UBS competes with investment bankers as well as asset managers operating in-house. Here’s how some of these companies fared in terms of revenue growth in 1Q15:
- T. Rowe Price (TROW) – 8% growth
- Goldman Sachs (GS) – 7% growth
- Morgan Stanley (MS) – 10% growth
- KKR (KKR) – 6.4% growth
For broader exposure to the financial sector, consider the Financial Select Sector SPDR Fund (XLF).