The logo of the Swiss banking giant UBS engraved on the wall can be seen on May 8, 2019 at the headquarters in Zurich.

Fabrice Coffrini | AFP | Getty Images

LONDON – UBS reported net earnings of $ 1.8 billion for the first quarter of 2021 on Tuesday as it impacted earnings from the Archegos Capital scandal.

The Swiss bank announced that revenues were down $ 774 million on the failure of the Archegos hedge fund, which collapsed last month after taking too much risk. The US-based family office was a client of UBS’s prime brokerage business.

UBS announced Tuesday that it had given up all holdings in Archegos and that any related losses in the second quarter would be “negligible” to the bank.

A number of banks have been hit by the scandal, including Credit Suisse, which posted a net loss for the quarter last week that increased to a loss of 4.4 billion Swiss francs ($ 4.8 billion) due to its collapse US hedge funds.

“Our first quarter results also took into account a loss related to the default of a single US-based prime brokerage client. We are all clearly disappointed and take this very seriously,” said Ralph Hamers, CEO of UBS, in a statement and added that a detailed review of the risk management was underway.

UBS net income rose 14% year over year for the first quarter. According to Refinitiv, analysts had expected a value of 1.6 billion US dollars in the reporting period.

UBS said that future revenue in the second quarter will be affected by “seasonal factors” such as lower client activity compared to the first three months of the year. The Swiss bank expects higher asset prices to have a positive effect, but cautioned that there is “ongoing uncertainty” about the economic recovery that could affect its next profits.

Further highlights of the quarter:

  • Operating income was $ 8.7 billion compared to $ 7.9 billion a year ago.
  • Operating costs were $ 6.4 billion compared to $ 5.9 billion a year ago.
  • The CET 1 rate, a measure of the solvency of banks, reached 14% compared to 12.8% a year ago.