(Bloomberg) -- UBS Group AG reported fourth-quarter profit that beat expectations and said it plans to buy back more than $5 billion of shares this year, as rising interest rates helped offset a slump in trading fees and transaction income at the key wealth management business.
Most Read from Bloomberg
Wall Street Is Losing Out to Amateur Buyers in the Housing Slump
Trump Sues Journalist Bob Woodward for Releasing Interview Recordings
Adani Rout Hits $68 Billion as Fight With Hindenburg Intensifies
Even on $100,000-Plus, More Americans Are Living Paycheck to Paycheck
The 'Big Shift' That's Finally Causing Rents to Fall
The Zurich-based bank reported net income of $1.65 billion on Tuesday, aided by a 35% surge in interest income at the wealth management unit, the margin that the company makes on loans. Earnings for that business broadly met estimates, with the bank reporting $23.3 billion in wealth inflows. Revenues at the investment bank fell by 24% while compensation costs rose.
Read More on UBS Estimates: UBS's Cost Savings, Share Buybacks in Focus: Preview
While UBS has stood out among global peers in its confidence that large-scale job cuts seen at Goldman Sachs Group Inc and elsewhere can be avoided, it is still contending with the impact of a slowdown in client activity and volatile markets. Cost pressures playing out across the industry were particularly acute at the investment bank, while wealth management fees fell as clients held back from trading in the final three months of a year in which markets whipsawed.
Click here for a German version of this article.
The results come amid a "challenging macroeconomic environment, persistent inflation, rapid central bank tightening the Russia-Ukraine war, the impact of COVID in China, and other geopolitical tensions," Chief Executive Officer Ralph Hamers said in a statement Tuesday.
The bank increased the dividend for 2022 to $0.55 per share.
UBS's investment banking unit posted $1.68 billion in revenue in the fourth quarter, down 24% from a year earlier, while operating expenses increased 3% on higher variable pay. The cost-to-income ratio at the investment bank jumped more than 24 percentage points. Revenue in advisory and capital markets slumped 52% in the quarter, broadly in line with Wall Street peers.
Read More: Barclays, Deutsche Bank Set to Top European Bond Trading Surge
Revenues at the key wealth management unit declined 5% from the previous year, driven partly by transaction-based income which fell 19% in the quarter.
Question marks remain over the wealth-management strategy in the US, after Chief Executive Officer Ralph Hamers' signature push into a broader wealth segment was abandoned last year.
Hamers faced a major setback in September when the bank announced it was pulling out of a deal to buy US robo-advisor Wealthfront. Instead, UBS has retrenched, saying it would focus on its traditional very high net worth customer base. The bank plans to offer more traditional banking services to its wealthy American clients. The Swiss bank will also set targets for its expansion in wealth management in the US, according to chairman Colm Kelleher.
UBS is seeking to expand its operations in the Middle East with a particular focus on wealthy Indians living in the region. Earlier this month, the bank hired a group of private bankers from Credit Suisse Group AG in Dubai to focus on its business that caters to the diaspora.
The Swiss bank saw significant inflows into its Asian wealth management business over in the last three months of 2022, as rich customers flee its biggest rival. Credit Suisse clients concerned over the turmoil the bank has been experiencing are approaching UBS as an alternative for managing their wealth.
UBS has said it expects a boost in its China business in the second half of the year, as the country moves away from a zero-Covid policy and reopens the economy.
Read more: UBS Backtracks on CEO's Plan to Reach Wider Swath of US Wealthy
Most Read from Bloomberg Businessweek
How to Be 18 Years Old Again for Only $2 Million a Year
The Secret to EV Success Is the Software
Spanish-Speaking Streamers Are the Hottest Thing on Twitch
From 'the Coin' to High-Interest Bonds, the US's Debt-Limit Options Aren't Great
©2023 Bloomberg L.P.