More than a year ago, UBS pledged to overhaul its investment bank after a prominent trading loss and a rate-rigging scandal. Those efforts appeared to be bearing fruit, based on the bank’s latest earnings report released Tuesday.
The Swiss bank said that the fourth-quarter revenue in its investment banking unit rose to $1.9 billion Swiss francs ($2.1 billion), 16 percent higher than the period a year earlier. The division’s profit before taxes was 297 francs ($328 million), compared with a pretax loss of 243 francs a year earlier.
After layoffs and other cuts, the investment bank reduced its personnel expenses by 28 percent for the quarter, helping bolster profitability. Its general and administrative expenses rose by just 4 percent.
In certain areas, however, the investment bank showed weakness. Revenue in its debt capital markets business was down 30 percent from the period a year earlier, and revenue in its currency, rates and credit trading business declined 2 percent. A number of banks struggled with fixed-income businesses the final months of the year, amid uncertainty over interest rates.
The quarterly results also showed UBS’s increased focus on wealth management. Profit before taxes in that division came in at 471 million francs, 18 percent higher than the period a year earlier. In the wealth management unit for the Americas, pretax profit rose 62 percent, to 254 million francs.
Over all, UBS said that its quarterly profit rose to 917 million francs, compared with a loss of 1.9 billion francs in the period a year earlier. The bank was helped by a tax gain of 470 million francs in the fourth quarter of 2013.
In a sign that UBS was looking to leave the scandals of 2012 in the past, the bank significantly increased its bonuses for 2013. It restored bonuses that were harmed by the scandal over manipulation of the London interbank offered rate, or Libor, and sought to make pay more in line with competitors, according to a letter to shareholders.
That led to a 28 percent increase in the 2013 bonus pool, to 3.2 billion francs.
“We finished a transformational year ahead of the majority of our strategic and financial targets,†Axel A. Weber, the chairman of UBS, and Sergio P. Ermotti, the chief executive, said in the letter to shareholders.
At the same time, UBS tweaked its pay to try to ensure that top executives are focused on reducing risk and improving the bank’s financial resilience.
The bank pays a portion of its compensation in the form of so-called deferred contingent capital, bonds that are forfeited if the bank’s capital ratio â€" a measure of its ability to withstand shocks â€" falls below a certain level. In order for members of the executive board to receive this compensation, UBS’s ratio must remain above 10 percent, an increase from 7 percent. The bank said its capital ratio was 12.8 percent.
“A year ago, we said we would further adapt our business to better serve clients, reduce risk, deliver more sustainable performance and enhance shareholder returns,†Mr. Ermotti said in a statement. “I am pleased to report that in 2013 we accomplished all those goals.â€
