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Asia will contribute a much higher percentage to UBS’ earnings going forward, according to Edmund Koh, the head of the company’s business in the region. One reason is the region’s faster recovery from the corona-crisis.
Asia contributed 30 percent to the profit of UBS in the first half of 2020, the first time that the region has had such a major impact on Switzerland’s largest bank. While Asia previously contributed with a share of between 14 and 20 percent of group earnings, the division now aims to go beyond 30 percent, said Edmund Koh, the head of UBS Asia-Pacific in an interview.
The Asian economies seem to be emerging from the pandemic-induced slump much earlier than European and American economies, which is one of the main reasons for the surge in the contribution of the region to UBS earnings. UBS Asia-Pacific pretax profit jumped 71 percent to $233 million in the second quarter compared with a year earlier.
With plenty of liquidity in the market and very low-interest rates, clients went shopping for higher yields in the first half, which meant that trading was brisk and invested assets rose, according to Koh.
The banker expects the good earnings momentum to persist throughout the second half of 2020, with July being described as «pretty good». Koh told the newspaper that based on the team’s performance in the first half and since he would expect the unit to maintain the result and end the year on an all-time record.
The U.S. elections and the economic slump in parts of the world most affected by the pandemic will create more «nervousness» in the market in the second half, which will present more opportunities for investors, Koh added. Overall, trade and consumption will fuel economic growth in Asia in the second half, which gives the bank reason to remain «risk-on» in the region. Singapore and India are the equity markets most preferred by UBS in Asia.
Koh also suggested that the banking industry may suffer in coming quarters as government support measures end. Still, with UBS being in the market for the wealthy clientele, it is likely to be less affected by the risk of bad debt.
