UBS CFO sees increased client caution as global economy slows

UBS (UBSG.S) is seeing increased caution among its clients as worries about the slowing global economy, rising inflation and energy prices hit investor confidence, Chief Financial Officer Sarah Youngwood said on Tuesday.

“The clients… are cautious, obviously, given what is going on in the world. That is translating into less transactions and less recurring revenues,” Youngwood told the Barclays Financial Services Conference.

The pattern followed the economic performance of regions, with the United States and Switzerland faring better, while clients in the Asia-Pacific region were still deleveraging, she said.

“Europe and the U.K, a bit more, are in a difficult, cautious situation,” she said.

The bank’s investment banking business was seeing a continuation of patterns from the second quarter, she said.

“You are seeing the wallet continuing to be very down for the industry, whether it is advisory or capital markets. The pool is just really down,” she added.

The bank was not seeing any material issues in its leveraged capital markets business, she added, where UBS was conservatively positioned.

“With a good first half of the year (we are) still expecting to be within our cost income as well as return on CET 1 target for the year and are continuing to be defensively positioned …with our strong balance sheet,” Youngwood said.

Earlier on Tuesday UBS said it plans to increase its dividend by 10% and expects 2022 share repurchases to exceed its $5 billion goal, boosting payouts after scrapping a $1.4 billion deal to buy automated wealth management provider Wealthfront.

Youngwood said the bank felt it important to acknowledge the excess capital it had built up and increase the pay-out ratio, which was lower compared with other banks.

She declined to quantify how much the increased payouts could be in future.

“We do not make any commitments of how much this will be over many years. But it will be a reflection of being capital generative,” she said.