By Andrew Welsch

UBS reported stronger-than expected first-quarter earnings on higher trading and transactional revenue, but the Swiss bank's CEO warned that tariff-related uncertainty could chill economic activity.

UBS reported $1.69 billion in net profit attributable to shareholders, beating the average analyst estimate of $1.43 billion, according to FactSet. The Zurich-based bank reported $1.76 billion for the same period a year ago.

The company's shares in New York were down 1.2% at $30.16 early Wednesday afternoon while the S&P 500 index was down 0.9%.

Like other banks, UBS said a surge in first-quarter investor activity and trading boosted earnings. Global markets revenue jumped 32% year over year to $2.47 billion. Transaction-based revenue for the global wealth management unit soared 37% to $1.43 billion, helping to offset an 8% decline in net interest income for the unit.

CEO Sergio Ermotti's opening remarks on the company's earnings call focused on the rapidly changing macroeconomic environment, which is being influenced by President Donald Trump's tariffs. There has been a "substantial shift in investor sentiment" due to significant market volatility, Ermotti said.

"While we are encouraged that [trade] negotiations are ongoing, a prolonged period of discussion and speculation will come at a cost," he said. "Uncertainty is likely to affect sentiment and lead businesses and investors to delay important decisions on strategy, capital allocation and investment. In this environment, we expect financial markets to remain sensitive to new developments, both positive and negative, which are likely to lead to further spikes in volatility."

He added that "we saw a huge spike in client activity" in April, reaching levels not seen since peak Covid times. But in the past week, fatigue is setting in and activity is stabilizing, as investors take a wait-and-see attitude on trade policy and negotiations, Ermotti said.

UBS faces the possibility that Swiss authorities this summer will increase capital requirements Analysts at Vontobel said that may be weighing on the stock despite an otherwise strong quarter for UBS. "We believe regulatory uncertainty is the main reason for the massive underperformance of UBS shares over the last 12 months vs global peers," the analysts wrote Wednesday.

All eyes on America. UBS said it continues to integrate former rival Credit Suisse, which it acquired two years ago. The deal supercharged UBS' wealth management business, which is its largest by revenue. The company has also put a renewed focus on growing in the all-important U.S. market and increasing its pretax profit margins there. Among other changes, UBS is investing in technology and advisor services, and pursuing a U.S. national bank charter to expand lending services.

The company's Americas unit brought in $20.2 billion in net new assets, representing the majority of the wealth unit's total $32 billion haul for the quarter. For the same period a year ago, the Americas unit reported net new assets of $13.7 and the wealth's total haul was $27.4 billion.

The ranks of financial advisors thinned in UBS' Americas unit during the first quarter. Advisor head count has been top of mind for some analysts since UBS trimmed aspects of advisor pay for this year, a move that may have prompted some advisor teams or individual advisors to depart for rivals. The Americas unit had 5,884 financial advisors at the end of the quarter, down 3.2% from 6,079 for the first quarter of 2024. The latest figure marked a 1.4% decline from 5,968 at the end of last year. The bulk of UBS' advisors in the Americas unit work in the U.S., although it also employs some in Canada and Latin America.

Speaking on the earnings call, CFO Todd Tuckner said the platform is stable and advisors are embracing UBS's strategy and investments.

"There's been a broad support for our strategy, which is intended to better align advisor incentives with the strategic goals of the firm," he said. "That's evidenced by the very strong same-store net new money we've seen, perhaps the strongest net new money we've seen over many quarters in the first quarter. In terms of the head count, I would just say that our recruiting pipeline is robust. There is some attrition that one can expect."

This week, UBS unveiled plans to expand its Workplace Wealth Solutions business in the U.S. The unit provides record-keeping and other services for corporate equity plans; it serves nearly three million plan participants and more than $180 billion in assets.

Write to Andrew Welsch at andrew.welsch@barrons.com

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April 30, 2025 13:07 ET (17:07 GMT)

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