Taking command of a bank as strong as UBS has pitfalls. New boss Ralph Hamers will be measured against steely predecessor Sergio Ermotti. The former head of ING cannot expect any of the easy wins claimed by troubleshooters at European lenders that are struggling. On Tuesday his task was to front forecast-beating fourth-quarter results for which he could claim little credit. If positive trends weaken, he will bear the blame.

UBS is primus inter pares among European universal banks, who are hampered by fragmented markets and political interference. Earnings at a decade high reflected investment banking’s renaissance and a one-way demographic bet on wealth management. Low interest rates were barely a factor.

Hectic trading and capital raising activity pushed underlying profits to $2bn in the quarter. That was two-thirds above 2019’s result and a half more than analysts had pencilled in.

Cost-cutting by Mr Ermotti primed UBS for this result. Take the investment bank. Here, full-year revenues rose by about a third. Pre-tax profits increased more than three times. Performance fees generated from the vast trove of client wealth grew by a similar magnitude.

The results are reflected in shares trading at tangible book value, closer to big US investment banks than any European rival. The test for Mr Hamers is to maintain parity in weaker conditions. Doubling down on cost cuts will be essential.

Operating expenses last year were essentially flat, after adjusting out bonuses and currencies. Extraordinary profits helped flatten the full-year cost/income ratio to 73 per cent, from 81 per cent in 2019. That is still at least 10 percentage points above the average for European banks. Large asset managers on the continent, with which UBS has similarities, are achieving cost to income ratios in the low and mid 50s.

Cutting costs will not be enough. Managing $4.1tn in client money, UBS is one of the very few European institutions that can go toe-to-toe with America’s giant fund houses. Mr Hamers will ultimately be judged on whether he can maintain and expand the wealth management franchise, particularly in Asia.

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