UBS Navigates Profit Gains Amid Tariff-Driven Uncertainty
15min read UBS reported a stronger-than-expected first-quarter 2025 profit of $1.7 billion, up 15% in core earnings year-on-year, driven by robust performance in its investment banking division and ongoing cost savings from the credit suisse integration. However, the Swiss banking giant warned that U.S. tariff policies under Donald Trump—now escalating in 2025—are creating a “material risk to global growth and inflation,” casting a shadow over its outlook.
The results highlight UBS’s ability to capitalize on market volatility, with its Global Markets division reporting a 32% year-on-year revenue surge to $2.5 billion as traders scrambled amid tariff-driven uncertainty. Yet, the same risks now loom as a threat to future growth, with the bank projecting declines in net interest income (NII) across key divisions.
Profit Drivers: Trading Volatility and Cost Discipline
UBS’s first-quarter success stemmed from two pillars: record trading volumes and disciplined cost management. The Global Markets division, benefiting from heightened client activity in equities and foreign exchange, delivered its strongest quarter in years. Meanwhile, the integration of Credit Suisse advanced, with cumulative cost savings hitting $8.4 billion (65% of a $13 billion target).
The bank’s core businesses—Global Wealth Management, Asset Management, and Investment Banking—saw underlying pre-tax profit (PBT) rise 15% year-on-year. Global Wealth Management added $32 billion in net new assets, while Swiss lending grew with $40 billion in loans granted or renewed.
Yet, the near-term outlook is clouded by macroeconomic headwinds. UBS warned of a “low-single-digit percentage sequential decline” in Global Wealth Management’s NII in Q2, alongside similar drops in Swiss Personal & Corporate Banking NII (in CHF terms). The latter’s USD-denominated NII, however, is expected to rise by a “mid-single-digit percentage” due to foreign exchange dynamics.
The Tariff Factor: A Double-Edged Sword
U.S. tariffs, now a focal point of global trade tensions, have created a paradox for UBS. While early 2025 volatility fueled trading gains, prolonged uncertainty threatens to derail corporate activity and client confidence.
UBS explicitly flagged tariffs as a “material risk,” noting their potential to delay M&A deals and weaken global growth. CEO Sergio Ermotti described the April 2025 tariff announcement as creating “extremely volatile” markets, with transaction volumes spiking 30% above pandemic-era highs. Yet, this volatility is unsustainable.
Analysts at Citi observed that UBS’s results were “boosted by non-core gains and heightened trading activity… whereas NII has missed expectations again.” This underscores a critical flaw: UBS’s profitability hinges on temporary tailwinds, not steady income streams.
Regulatory and Structural Pressures
Beyond tariffs, UBS faces regulatory headwinds. Swiss authorities are pushing stricter capital requirements to address the bank’s “too big to fail” status, a move UBS opposes as potentially undermining its competitiveness. Meanwhile, a looming 31% U.S. tariff on Swiss exports (if no deal is reached by July 2025) threatens the bank’s Americas-focused wealth management division, which holds ~50% of its invested assets.
UBS’s CET1 capital ratio remained robust at 14.3%, but its return on tangible equity (RoTE) dipped to 8.5%, reflecting operational pressures. The bank’s share price has fallen ~10% year-to-date, partly due to these macro and regulatory risks.
Conclusion: Resilience Amid Uncertainty
UBS’s Q1 results demonstrate its ability to navigate turbulent markets, but its outlook hinges on resolving external risks. While cost discipline and trading gains provided short-term wins, the bank’s long-term success depends on stabilizing tariff policies, avoiding regulatory overreach, and sustaining client confidence.
Key data points reinforce this caution:
- Profitability: Core PBT rose 15%, but NII missed expectations.
- Tariff Impact: U.S. tariff-driven volatility boosted trading but risks delaying $50 billion+ in M&A pipelines.
- Capital: CET1 of 14.3% provides a buffer, but RoTE remains below targets.
Investors should view UBS as a resilient player in volatile markets but remain wary of external headwinds. Until tariff and regulatory risks subside, the bank’s growth will remain uneven—a tale of two quarters: one of gains, and one of waiting.
