Market doldrums, UBS’ big payday

• Published date: 26 April 2024
• Publication title: New Zealand Herald, The (Auckland, New Zealand)

The benchmark S&P/NZX 50 index has so far flirted with just over 12,000 points — hitting 12,105 in late March — but has since dropped back as the prospect of rates remaining elevated for most of the year sinks in

A profound change in interest rate expectations from the US Federal Reserve, coupled with news of a 4 per cent increase in the New Zealand consumers price index (CPI) for the March year, have seen rate rises across the New Zealand yield curve.

“Ongoing inflation and higher rates for longer is very much a theme that the market has begun to accept and price in,” Salt Funds managing director Matt Goodson says.

Goodson says the issue is non-tradeable — or domestic — inflation, which chiefly comes from the service sector, with labour costs in turn being the major component of that.

“We are experiencing recession-like conditions, but in the words of [former Australian Treasurer] Paul Keating, it’s the ‘recession we have to have’ — it’s payback for the fiscal and monetary laxity of 2020-22.”

UBS payday Auckland Council’s sell-down of its stake in Auckland International Airport looks to have given one local investment bank a timely boost.

UBS New Zealand saw its after tax profit for the 2023 financial year climb to $10.1 million following a net loss of $830,000 in 2022.

The turnaround was largely due to a big lift in income from fees and commissions, which increased from $26.4m in 2022 to $38.17m in the year to December 31, 2023.

Some of that would have stemmed from UBS’s mandate to sell down Auckland Council’s holding in Auckland International Airport. The council sold 7 per cent of its 18 per cent shareholding to pay down debt.

UBS NZ, which is involved in advising, underwriting, financing and brokerage, has been in New Zealand for more than 60 years.

The firm was recently involved in advising Goodman New Zealand on a deal to internalise management of Goodman Property Trust.

In January, Matthew Beggs, UBS Group’s head of equity capital markets for Australia and New Zealand, told Bloomberg the investment bank was looking at alternatives to new share listings after the lowest amount in over a decade was raised in those two countries. Alternatives included block trades and capital raises for takeovers.

Bank results With a slew of bank results coming up, Fitch Ratings said the stand-alone credit profiles of New Zealand’s four largest banks, ANZ Bank NZ, ASB Bank, Bank of NZ and Westpac NZ, continued to be resilient.

But the agency says the banks face a...