UBS shows strong profits and franchise strength in Q1 2025 with robust CET1

UBS has reported (30 April 2025) 2.1bn USD PBT (profit before tax) for Q1 2025 and a net profit of 1.7bn USD with RoCET1 of 9.6%.

Measures of franchise momentum have also been positive: this includes USD 32bn of net new assets into Global Wealth Management and USD 7bn of net new money into Asset Management.

UBS also calculates an underlying PBT and underlying RoCET1 which excludes P&L items which management consider not representative of underlying performance.  This gives a higher PBT number and higher RoCET1.

Capital position is strong with CET1 ratio of 14.3% and CET1 leverage ratio of 4.4% (banks have a requirement to keep their CET1 ratios above 4.5% to meet Basel standards with additional plus points if over 14%). UBS has stated this provides "a solid capital buffer to requirements during integration" (referring to Credit Suisse integration) and "given increased market volatility" (driven by US tariff policy changes).

The CET1 ratio is used to gauge a bank's solvency and capital strength.  

CET1 stands for Common Equity Tier 1 and measures the bank's "core capital" including common shares and retained earnings.  The BIS describes CET1 as the "highest quality of regulatory capital, as it absorbs losses immediately when they occur".

Tier 1 capital consists of CET1 and Additional Tier 1 (AT1) capital. Contingent convertibles (which can be converted into equity) and other kinds of hybrid securities qualify as AT1 capital. Typically these convertibles will have "triggers" to convert into common equity or be written off if CET1 ratios fall below a certain level.

Tier 2 capital consists of instruments other than common equity and is less discussed.

Growth including GenAI and cloud investments have included the roll-out of 50,000 Copilot licenses to employees (UBS has over 110,000 employees so this is under half of employees, including contractors), increased cloud usage to ~75% and an exclusive JV with 360 ONE on wealth management in India and international markets.

There are a few areas not covered by the broad results announcement - how well has Trading done, and how reliant is UBS on trading now relative to wealth and asset management.

Bank of England Governorship Up for Grabs

With Mark Carney due to step down, the governorship for the Bank of England is up for grabs.

Names "in the frame" include Agustin Carsens, former Central Bank governor of Mexico who is now general manager of the BIS, and Raghuram Rajan, former Central Bank governor of India.

American economist Jason Furman, who has a PhD from Harvard and is currently a Professor at HKS and was Barack Obama's Chief Economic Adviser for eight years, has also been tipped as being in the race. He has also worked at the CEA (Council of Economic Advisers).

Other names include Andy Haldane, Chief Economist at the Bank of England, whose six-year term at the BoE ends on 11 June 2020. A founder of "Pro Bono Economics" and author of 4 books, he is also a Visiting Fellow at Nuffield College, Oxford. He has a Fellowship of the Academy of Social Sciences (FAcSS). He is also Chair of the UK government's Industrial Strategy Council.