Swiss bank UBS Group AG expects to benefit more from rising interest rates in 2023, as recent actions by central banks helped bolster profits in the fourth quarter, surpassing analyst estimates.

UBS, the world's largest wealth manager, booked fourth-quarter 2022 net interest income of $1.59 billion. For 2023 as a whole, NII is expected to be higher than for the fourth quarter of 2022 annualized, CFO Sarah Youngwood said in a presentation to analysts. In the first quarter of 2023, NII is expected to be higher by a low- to mid-single digit, Youngwood said.

The bank's assumption is that a 100 basis point yield curve shift could mean up to $1.5 billion of combined increases in the annual NII of its global wealth management and personal and corporate banking divisions in the first year after the movement.

In the global wealth management business, NII in the fourth quarter rose 35% to $1.50 billion from the year-ago $1.11 billion, principally driven by higher deposit revenues, UBS said. The division yielded a total pretax profit for the quarter of $1.06 billion.

Profit increase

At group level, UBS booked a quarterly net profit of $1.65 billion, up 23% year over year, and beat the $1.28 billion average analyst estimate the bank compiled. Its full-year 2022 net profit climbed to $7.63 billion from $7.46 billion in 2021.

UBS proposed a dividend of 55 cents per share in respect of 2022. It also plans to repurchase shares of more than $5 billion through 2023, building on the $5.6 billion bought back the previous year.

The bank booked net new fee-generating assets of $23.3 billion in the quarter, representing 7.9% annualized growth, driven by advisory mandates. Of the inflows, $10.6 billion were in the Europe, Middle East and Africa wealth management operations. In Asia-Pacific, the inflows were $3.4 billion.

With China reopening its economy after a long period of lockdowns, the bank is optimistic about its business there. A 5% economic growth rate in the country is now "back on the table," CEO Ralph Hamers said, noting that clients are taking a "wait-and-see" approach so far.

Hamers said gaining clients as competitors see outflows is "not the primary source of our growth at all ... It is more because of what we represent and what we do that we attract these flows than the other way around."

Investment bank

Pretax profit at the investment bank slumped year over year, to $112 million from $713 million, driven by lower revenues, higher operating expenses and net credit loss expenses. The foreign exchange, rates and credit business was a bright spot, with revenues increasing 13%, benefiting from elevated volatility due to concerns about inflation and central bank actions.

For the full year, investment bank pretax profit was $1.90 billion, down from $2.63 billion in 2021.