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Under the hood of UBS’s Q2 results

A strong quarter for UBS contained a few of the usual curiosities in the investment bank.

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Analysts liked the look of UBS’s Q2 numbers this morning, giving CEO Sergio Ermotti a fairly comfortable time in their question-and-answer session.

And with good reason – the bank beat expectations, with higher deposit margins and lending counteracting net new money falls in global wealth management, and the trading businesses leading the investment bank numbers.

Ermotti complained about regulatory costs: TLAC has led to increased funding costs of about $700 million per year; the bank spends more than $1.5 billion on regulatory matters each year; anticipated changes related to Brexit will cost UBS over $100 million.

But the big picture is a good one.

He repeatedly name-checked Asia and the Americas as the key regional drivers of growth for the firm across all its franchises. China will continue to be a particular investment focus, while a rebalancing of the investment banking businesses will come from “dozens” of hires to come in the US, where the bank recently appointed a new head of corporate client solutions in ECM veteran Sam Kendall. 

[Activity levels] were not skewed towards our strengths - Sergio Ermotti

On the face of it, however, some bits of the investment bank looked oddly off-colour and are worth taking a closer look at.

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