UBS Trading Risk Triples at Equities Unit on Surging Volatility

(Bloomberg) -- UBS Group AG, which relies on dealing in stocks for much of its revenue, reported a tripling of trading risk at that business as clients rushed to make bets during one of the most volatile periods in years.

UBS joined other global investment banks in taking on more risk during the first quarter as stocks peaked and then tumbled, sending the price swings that traders exploit for profit to the highest in 2 1/2 years.

The Swiss bank’s average daily value-at-risk, or VaR -- an estimate of the most a firm might lose on all but the most exceptional trading days -- was 12 million francs ($12.3 million) at the equities unit at the end of March, UBS said Monday in a report. That’s up from 4 million francs a year earlier and was twice the figure in the final quarter of 2017.

Revenue from trading equities jumped 17 percent to 1.1 billion francs, beating the forecasts of analysts at JPMorgan Chase & Co. and HSBC Holdings Plc.

UBS added 7 billion francs of risk-weighted assets compared with the end of December as a result of the surge in trading risk, a figure that’s likely to drop in the absence of more volatility spikes, UBS Chief Financial Officer Kirt Gardner told analysts on a call to discuss the results.

“All of the increase was really driven out of our equity franchise,” Gardner said. “It was a combination of a spike in volatility, and just how we risk-managed the book that led to the” increase in risk-weighted assets, he said.

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