UBS achieves highest Q3 profit in five years

KGroup boss Sergio Ermotti says goodbye to UBS with a jump in profits. The largest Swiss bank doubled its surplus in the third quarter of 2020 to 2.1 billion dollars – the highest figure in a third quarter in five years. According to a survey by the bank, analysts had expected a profit of 1.56 billion. Proceeds from the sale of the fund distribution platform Fondscenter to Deutsche Börse inflated the result. But day-to-day business also went better than expected, mainly because many customers continued to be very active and thus gave the bank commission fees.

After the round of American institutes, UBS was the first major European bank to report on the summer quarter on Tuesday. Things went particularly well in asset management, in business with professional investors such as pension funds and in investment banking. Only in business with Swiss private and corporate customers did the institute earn less than a year ago. The allowance was down from the previous quarter to $ 89 million. At $ 2.6 billion, UBS achieved the highest pre-tax profit in a third quarter in ten years.

American investment banks such as Morgan Stanley, JP Morgan and Goldman Sachs also benefited from the boom on the stock markets in the summer. Business with bonds and stocks was particularly booming. Deutsche Bank, which will present its quarterly figures on October 28th, has also announced growth in investment banking.

No security was found!

Ermotti leaves the bank much more weatherproof than he found it in 2011. The institute also demonstrated this during the corona pandemic. The worst economic crisis in decades has so far only scratched business. During his time as CEO, Ermotti reduced the risky trading business and focused primarily on the less volatile business with the rich and the super-rich. Chairman of the Board of Directors Axel Weber is now expecting a renewal of the bank from Ermotti’s successor Ralph Hamers. The Dutchman has made a name for himself at ING above all with the digitization of mass business. Skeptics, however, point out that restructuring the business with wealthy private customers based on personal relationships will be more difficult than with small customers.

Hamers cannot count on much tailwind from the market for the time being. The renewed rise in the number of coronavirus cases and growing geopolitical tensions could cloud the growth prospects and dampen investor sentiment, the institute warned.

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Frankfurt is hardly affordable for citizens

IIn many cities, housing prices are moving further and further away from what even high-earning workers could still pay. According to an international analysis by the major Swiss bank UBS, the two German cities of Munich and Frankfurt are at the forefront of this worrying development. Overall, according to UBS, there is a risk of a bubble in the housing market in 5 major European cities.

Mark Fehr

While Munich is at the top of this risk zone for the second time, Frankfurt has left the metropolises of Amsterdam, Hong Kong and Toronto behind within a year and is now in second place in the global UBS bubble ranking. In a global comparison, Europe has developed into the region with the most overheated housing markets. “No other city in the world is as exposed to the risk of a real estate bubble as Frankfurt and Munich,” said Maximilian Kunkel, chief investment strategist for UBS in Germany. Kunkel warns investors against excessive return expectations, also because current property prices have not yet reflected the long-term consequences of the corona pandemic.

According to UBS, the housing markets remained largely stable in the first half of 2020 despite the Corona crisis. Among other things, this is due to the fact that house prices are a lagging indicator and only react to a downturn with a time lag. In addition, most homebuyers have not yet suffered any immediate loss of income in the first half of the year. Aid loans for companies and short-time work would have mitigated the consequences of the pandemic.

Nine annual salaries for only 60 square meters

In the case of Munich, housing prices are rising mainly because of the strong local economy combined with attractive financing conditions and solid population growth. The undersupply of living space in the Bavarian capital has therefore worsened, according to UBS. To buy an apartment of just 60 square meters near Munich city center, a qualified employee from the service sector currently has to raise around 9 annual income. By renting out such an apartment, the purchase price can only be recovered after 39 years, which means that it takes longer in Munich than in any other metropolis in the world.

In the case of the banking and stock exchange city of Frankfurt, housing prices have doubled over the past decade, according to UBS. Real prices rose by 8 percent in the past year alone. As one of the largest financial centers in Europe, Frankfurt has benefited from solid economic and employment growth. At the same time, the population has grown, which is due to both a birth surplus and migration. As a result of this development, rents in Frankfurt have risen by almost 40 percent since 2010. In addition, project developers have primarily targeted the upper market segment, which is further fueling property price inflation and making the city increasingly unaffordable for its citizens.

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Shadow unemployment: the gaps in the statistics


It’s five to twelve: Employment Agency in Hamburg
Image: dpa

Much more people than the official quota shows have nothing to do at the moment. This also applies to Germany, where many people had to go on short-time work.

Kcan that really be? The economy is plunging into the deepest recession in a long time because of Corona – but the officially recorded unemployment is rising only a little, almost at a snail’s pace? According to the Eurostat statistics office, the unemployment rate in the euro zone was 7.2 percent in March, but the latest figures for July mean that it has increased to 7.9 percent. According to these statistics, only around one million more people have been on the streets since March, a total of 12.8 million. But these numbers only show part of the truth. At the same time, millions of people have been forced to reduce their jobs to short-time work; others have lost their jobs but do not appear in the official statistics as unemployed.

Economists at the major Swiss bank UBS have therefore carried out a calculation of “shadow unemployment”. Their result: In the spring quarter, actual unemployment in the euro zone was 20 percent and now, in the third quarter, it is probably 15 percent. That is twice as much as in the Eurostat figures. In Spain, UBS economist Anna Titareva suspects that despite the recent decline in short-time work, there are still well over 20 percent non-working people, in Italy almost 20 percent, in France around 13 percent and in Germany around 12 percent.

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Bank consolidation will pick up speed

NNew food for merger speculation in the banking industry: The CFO of Deutsche Bank, James von Moltke, said on Tuesday that the largest German financial institution is preparing for possible mergers and wants to seize opportunities. The head of the Swiss competitor Credit Suisse, Thomas Gottstein, also sees “a lot of sense” in merging banks. In Switzerland, media reports recently said that the major bank UBS was playing a merger with rivals Credit Suisse and Deutsche Bank, among others.

“We focus on the implementation of our own strategy and we are convinced that this strategy will prepare us for mergers when the time comes and the right opportunities arise,” said von Moltke at an online analyst conference. The institute is working “hard” to prepare for a wave of mergers. “Consolidation will pick up speed in Europe.” The industrial logic behind bank mergers is great. However, takeovers in the home market are still difficult. Last year, Deutsche Bank explored a merger with Commerzbank, but the talks were stopped after a few weeks.

Credit Suisse boss Gottstein also sees hurdles for mergers within the country’s borders. These are now more complicated than in the past, because supervisory authorities have resistance to domestic banks that are too large. However, the persistently low interest rates weighed on earnings and increased merger pressure on banks. “Let’s see how that develops,” said the manager at an industry event. “But in principle they make a lot of sense.”

The outgoing head of the major Swiss bank UBS, Sergio Ermotti, welcomes an industry consolidation in Europe. “The train left the station, and one
Consolidation is inevitable, ”he said at a Bank of America investor conference Tuesday. “That is good for the markets.” “But size in itself is meaningless. It is crucial to be large in an area in order to create sustainable shareholder value. In the past, the debate in Europe has been too much influenced by the question of which Risks for the financial system come from large banks. Too little attention was paid to the fact that institutions could also be too small to remain competitive. With the coronavirus crisis at the latest, a rethink had begun. The regulators were now ready to re-examine these questions evaluate.

“No panacea”

However, the German financial regulator Bafin does not consider mergers to be a panacea. Mergers could help to cut costs and give more leeway for price increases, said Raimund Röseler, executive director for banking supervision, at a banking conference of the “Börsen-Zeitung” in Frankfurt. “But do we really believe that the problems of the German banking market would be solved if we only had 700 or 500 banks instead of 1,400? I don’t think so. ”Rather, banks would have to worry about implementing new strategies. The costs in relation to the income are too high compared to other countries.

UBS has recently been at the center of media reports on big bank deals. Employees of UBS President Axel Weber had played through the possibility of a merger with rival Credit Suisse in the past few months, said a person familiar with the matter. This was also reported by the online portal “Inside Paradeplatz”. According to other media, Deutsche Bank, the British Barclays and the French BNP Paribas are also on a “wish list” of possible merger partners for the largest Swiss institute. According to the insider, concrete discussions for a deal are not ongoing.

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Dax opened below the 13,000 point mark

Nafter further profit-taking, the Dax struggled on Friday. The leading index had opened at 12,916 points, but worked back to 13,092 points. “With the price slide from the previous day, the Dax is back where it was in the previous weeks: in the eternally long sideways phase”, stated the UBS chart technology analysts. You can now see the index posted.

The technology indices, which had run hot in New York, were slowed down sharply the day before and had dragged other exchanges down with them. Now, with a view to the US labor market figures expected in the afternoon, investors seem to prefer to put further profits in the towel. On a weekly basis, the Dax is now in the red.

The M-Dax of the medium-sized stocks was quoted in early Friday trading hardly changed with plus 0.03 percent to 27,231 points. The Euro-Stoxx-50, the leading index for the Eurozone, fell by 0.4 percent.

The crash of the American stock exchanges on Friday also depressed sentiment in Asia: the price boards there showed losses across the board. But they weren’t quite as violent as in New York.

After the advance of prices in the wake of the major American technology stocks, yesterday’s setback was no surprise, commented a market strategist. The technology-heavy selection index Nasdaq 100 had lost more than five percent at the closing bell in New York – it was the most severe daily loss since its slump in mid-March in the wake of the spreading corona pandemic. Since the beginning of the year, however, there has still been a solid increase of almost 35 percent, making the stock market barometer one of the few winners worldwide.

In Tokyo, the Nikkei-225 closed on Friday with a loss of 1.1 percent at 23,205 points. The Japanese leading index claimed a weekly gain of almost one and a half percent. The CSI 300 with the 300 most important shares of the Chinese mainland stock exchanges fell recently by 1.3 percent to 4755 points. The Hong Kong Special Administrative Region’s Hang Seng Index fell 1.5 percent to 24,623 points.

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Why investors support the stock market


The Dax price on the Frankfurt Stock Exchange in times of Corona: Why does the leading German index hold steady at 10,000 points?
Image: Wolfgang Eilmes

Although the climax of the corona pandemic is still imminent, the Dax remains well above the 10,000 point mark. Is the stock market distant from reality – or what rhyme can investors make of it?

I.In retrospect, it seems plausible that the prices on the stock markets suddenly started to slide in early March. After all, the Dax had only reached a new all-time high in February with around 13,500 points. Only then did the fear of corona spread among investors in these airy exchange rates. First, stock prices around the world weakened every day before March 9, 2020, which was to be recorded as “Black Monday” in the history books.

Hanno Mussler

Inken Schönauer

Inken Schönauer

Business editor, responsible for the financial market.

In Asia, Europe, America, stock prices collapsed everywhere and destroyed billions of dollars in all currencies. The Dax alone dropped almost 10 percent that day. In the days that followed, it continued to slide, eventually closing near the 8400 mark. One asked oneself: How deep can the Dax actually sink?

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Oil states are said to have agreed on a cut in production

Dhe organization of petroleum exporting countries and their allies (Opec plus) apparently agreed on a video conference on Maundy Thursday in principle to reduce oil production. However, details were initially not officially disclosed. According to what you hear, Giovanni Staunovo, oil analyst at the major Swiss bank UBS, said in the early evening that oil production should be cut by 10 to 12 million barrels (barrel of 159 liters) for two months, namely May and June. A cut of 8 million barrels is planned for the period from July to December and the cut should be 6 million barrels per day for the period from January 2021 to April 2021. Much is still unclear, said Staunovo. In any case, it would not be the first time that results from Opec meetings were later corrected.

Christian Siedenbiedel

The oil markets, where a stronger cut in production had been expected in the meantime, were disappointed. The oil price, which had previously risen significantly, surrendered its profits up to a slight plus of around 2 percent. “It looks like a ceasefire,” said Carsten Brzeski, economist at Bank ING. “10 million barrels a day is not much, but a signal that you are giving up the price war and giving yourself a little more air to breathe.”

“The role of the United States still seems unclear,” said Frank Schallenberger, oil specialist at Landesbank Baden-Württemberg. “I cannot imagine that Saudi Arabia and Russia will cut unilaterally – and give the American dressers a free hand.”

Trump is approaching Opec

Talks of the G-20 group on Friday could give America the chance to react to the Opec results. So far, the American President Donald Trump had taken the position that American oil production would automatically decrease due to the low price. In addition, due to the private sector organization of the oil industry in America, prescribed cuts in funding are not so easy to implement. However, the president apparently discovered at least a certain love for Opec, reports the Bloomberg news agency. Trump told journalists in Washington that he had long considered this cartel to be “very unfair”: “I hated Opec”. Now, however, the opposite has happened. The reason is that America has an important oil industry – and it doesn’t want jobs to be lost there.

In the run-up to the conference, which was eagerly awaited on the oil market, the oil price had risen noticeably on Thursday morning. This trend intensified when the Reuters news agency, citing Opec sources, reported that Russia and Saudi Arabia had agreed on a “deal”: a reduction of 20 million barrels a day. After all, that would have been around 20 percent of the world’s oil production. Some traders had even speculated on a cut of 35 million barrels a day. The North Sea Brent oil rose temporarily by 11 percent – later the price fell again.

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Oil states are said to have agreed on a cut in production

Dhe organization of petroleum exporting countries and their allies (Opec plus) apparently agreed on a video conference on Maundy Thursday in principle to reduce oil production. However, details were initially not officially disclosed. According to what you hear, Giovanni Staunovo, oil analyst at the major Swiss bank UBS, said in the early evening that oil production should be cut by 10 to 12 million barrels (barrel of 159 liters) for two months, namely May and June. A cut of 8 million barrels is planned for the period from July to December and the cut should be 6 million barrels per day for the period from January 2021 to April 2021. Much is still unclear, said Staunovo. In any case, it would not be the first time that results from Opec meetings were later corrected.

The oil markets, where a stronger cut in production had been expected in the meantime, were disappointed. The oil price, which had previously risen significantly, surrendered its profits up to a slight plus of around 2 percent. “It looks like a ceasefire,” said Carsten Brzeski, economist at Bank ING. “10 million barrels a day is not much, but a signal that you are giving up the price war and giving yourself a little more air to breathe.”

“The role of the United States still seems unclear,” said Frank Schallenberger, oil specialist at Landesbank Baden-Württemberg. “I cannot imagine that Saudi Arabia and Russia will cut unilaterally – and give the American dressers a free hand.”

Trump is approaching Opec

Talks of the G-20 group on Friday could give America the chance to react to the Opec results. So far, the American President Donald Trump had taken the position that American oil production would automatically decrease due to the low price. In addition, due to the private sector organization of the oil industry in America, prescribed cuts in funding are not so easy to implement. However, the president apparently discovered at least a certain love for Opec, reports the Bloomberg news agency. Trump told journalists in Washington that he had long considered this cartel to be “very unfair”: “I hated Opec”. Now, however, the opposite has happened. The reason is that America has an important oil industry – and it doesn’t want jobs to be lost there.

In the run-up to the conference, which was eagerly awaited on the oil market, the oil price had risen noticeably on Thursday morning. This trend intensified when the Reuters news agency, citing Opec sources, reported that Russia and Saudi Arabia had agreed on a “deal”: a reduction of 20 million barrels a day. After all, that would have been around 20 percent of the world’s oil production. Some traders had even speculated on a cut of 35 million barrels a day. The North Sea Brent oil rose temporarily by 11 percent – later the price fell again.

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