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UBS Group's (UBS) Q4 Pre-tax Earnings Up on Lower Costs
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UBS Group AG (UBS - Free Report) reported fourth-quarter 2016 pre-tax operating profit of CHF 1.11 billion ($1.11 billion) on an adjusted basis, up 46.6% from the prior-year quarter.
While results reflected increase in net trading income, they recorded a decline in net fee and commission income. Notably, the quarter benefited from the company’s consistent focus on expense management.
However, the Swiss banking giant’s net profit attributable to shareholders of CHF 738 million ($737.6 million) plunged 22.2% year over year. Results included provisions forlitigation, regulatory and similar matters of CHF 162 million, along with restructuring expenses of CHF 372 million.
The company recorded improved profitability in its Investment Bank, Wealth Management Americas, Asset Management and Wealth Management units. However, profit at Personal & Corporate bankingwing remained stable.
Continued Cost Control Reflected, Operating Income Escalates
Excluding the significant items, UBS Group AG’s adjusted operating income increased 4% from the prior-year quarter to CHF 7.06 billion ($7.06 billion).
Adjusted operating expenses were down 4.9% year over year to CHF 5.8 billion ($5.8 billion). Expenses included provisions for litigation, regulatory and similar matters of CHF 162 million ($161.9 million), down 55.6% year over year. Notably, as of Dec 2016, UBS Group AG achieved net cost savings of CHF 1.6 billion and remains on track to achieve CHF 2.1 billion in net cost reductions, by the end of 2017.
Business Division Performance
Wealth Management Americas division’s adjusted operating profit before tax jumped substantially from the prior-year quarter figure to CHF 358 million ($357.8 million). Notably, net new money growth in the quarter was negative 0.5% compared with positive 6.8% in the year-ago quarter.
The Asset Management unit’s adjusted operating profit improved nearly 2% year over year to CHF 156 million ($155.9 million) in the quarter.
The company’s Investment Bank unit’s adjusted operating profit before tax came in at CHF 344 million ($343.8 million), up 54% from the prior-year quarter. Increased debt and equity capital market revenues, advisory revenues and higher revenues in equities revenues were partially offset by lower revenues from foreign exchange, rates and credit.
The Wealth Management division’s adjusted operating profit before tax inched up1% year over year to CHF 511 million ($510.7 million) in the quarter. However, net new money outflows in emerging markets and Europe, partly offset by inflows in Switzerland and Asia Pacific, resulted in annualized net new money growth rate of negative 1.7% compared with negative 1.5% in the prior-year quarter.
Personal & Corporate banking division’s adjusted operating profit before tax was stable, year over year, at CHF 395 million ($394.8 million).
Corporate Center reported adjusted operating loss before tax of CHF 662 million ($661.7 million) compared with a loss of CHF 586 million in the year-ago quarter.
Capital Position
As of Dec 31, 2016, UBS AG's invested assets were CHF 2.82 trillion ($2.77 trillion), up4.8% year over year. Total assets were CHF 935.02 billion ($917.5 billion), decreasing around 1% year over year.
UBS Group’s phase-in BIS Basel III common equity tier (CET) 1 ratio was 13.8% as of Dec 31, 2016, compared with 14.5% in the prior-year quarter. Further, phase-in BIS Basel III CET 1 capital dipped 6.4% year over year to CHF 37.8 billion ($37.1 billion) as of Dec 31, 2016. Fully applied risk-weighted assets climbed 7.3% year over year to CHF 222.7 billion ($215.8 billion).
Outlook
Though management remained concerned about geopolitical tensions and underlying macroeconomic uncertainties,which have been contributing to client risk aversion and low transaction volumes, improving investors’ confidence in the U.S. is expected to benefit the bank’s wealth management business. The company also highlighted several concerns including headwinds from negative interest rates. Further, the proposed changes to Swiss bank capital standards and global regulatory framework in Switzerland, will lead to higher capital requirements and expenses. However, amid a challenging operating environment, the company remains committed to the execution of its strategies.
Our Take
Results highlight a decent quarter for UBS Group with its major units exhibiting growth. We remain optimistic as the company managed to sustain profitability amid a number of headwinds witnessed in the quarter. UBS Group remains focused on building its capital levels. Restructuring initiatives, including cost control, are encouraging.
Among other foreign banks, Deutsche Bank AG (DB - Free Report) , Itau Unibanco Holding S.A. (ITUB - Free Report) and The Royal Bank of Scotland Group plc are scheduled to report results on Feb 2, Feb 7 and Feb 24, respectively.
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UBS Group's (UBS) Q4 Pre-tax Earnings Up on Lower Costs
UBS Group AG (UBS - Free Report) reported fourth-quarter 2016 pre-tax operating profit of CHF 1.11 billion ($1.11 billion) on an adjusted basis, up 46.6% from the prior-year quarter.
While results reflected increase in net trading income, they recorded a decline in net fee and commission income. Notably, the quarter benefited from the company’s consistent focus on expense management.
However, the Swiss banking giant’s net profit attributable to shareholders of CHF 738 million ($737.6 million) plunged 22.2% year over year. Results included provisions forlitigation, regulatory and similar matters of CHF 162 million, along with restructuring expenses of CHF 372 million.
The company recorded improved profitability in its Investment Bank, Wealth Management Americas, Asset Management and Wealth Management units. However, profit at Personal & Corporate bankingwing remained stable.
Continued Cost Control Reflected, Operating Income Escalates
Excluding the significant items, UBS Group AG’s adjusted operating income increased 4% from the prior-year quarter to CHF 7.06 billion ($7.06 billion).
Adjusted operating expenses were down 4.9% year over year to CHF 5.8 billion ($5.8 billion). Expenses included provisions for litigation, regulatory and similar matters of CHF 162 million ($161.9 million), down 55.6% year over year. Notably, as of Dec 2016, UBS Group AG achieved net cost savings of CHF 1.6 billion and remains on track to achieve CHF 2.1 billion in net cost reductions, by the end of 2017.
Business Division Performance
Wealth Management Americas division’s adjusted operating profit before tax jumped substantially from the prior-year quarter figure to CHF 358 million ($357.8 million). Notably, net new money growth in the quarter was negative 0.5% compared with positive 6.8% in the year-ago quarter.
The Asset Management unit’s adjusted operating profit improved nearly 2% year over year to CHF 156 million ($155.9 million) in the quarter.
The company’s Investment Bank unit’s adjusted operating profit before tax came in at CHF 344 million ($343.8 million), up 54% from the prior-year quarter. Increased debt and equity capital market revenues, advisory revenues and higher revenues in equities revenues were partially offset by lower revenues from foreign exchange, rates and credit.
The Wealth Management division’s adjusted operating profit before tax inched up1% year over year to CHF 511 million ($510.7 million) in the quarter. However, net new money outflows in emerging markets and Europe, partly offset by inflows in Switzerland and Asia Pacific, resulted in annualized net new money growth rate of negative 1.7% compared with negative 1.5% in the prior-year quarter.
Personal & Corporate banking division’s adjusted operating profit before tax was stable, year over year, at CHF 395 million ($394.8 million).
Corporate Center reported adjusted operating loss before tax of CHF 662 million ($661.7 million) compared with a loss of CHF 586 million in the year-ago quarter.
Capital Position
As of Dec 31, 2016, UBS AG's invested assets were CHF 2.82 trillion ($2.77 trillion), up4.8% year over year. Total assets were CHF 935.02 billion ($917.5 billion), decreasing around 1% year over year.
UBS Group’s phase-in BIS Basel III common equity tier (CET) 1 ratio was 13.8% as of Dec 31, 2016, compared with 14.5% in the prior-year quarter. Further, phase-in BIS Basel III CET 1 capital dipped 6.4% year over year to CHF 37.8 billion ($37.1 billion) as of Dec 31, 2016. Fully applied risk-weighted assets climbed 7.3% year over year to CHF 222.7 billion ($215.8 billion).
Outlook
Though management remained concerned about geopolitical tensions and underlying macroeconomic uncertainties,which have been contributing to client risk aversion and low transaction volumes, improving investors’ confidence in the U.S. is expected to benefit the bank’s wealth management business. The company also highlighted several concerns including headwinds from negative interest rates. Further, the proposed changes to Swiss bank capital standards and global regulatory framework in Switzerland, will lead to higher capital requirements and expenses. However, amid a challenging operating environment, the company remains committed to the execution of its strategies.
Our Take
Results highlight a decent quarter for UBS Group with its major units exhibiting growth. We remain optimistic as the company managed to sustain profitability amid a number of headwinds witnessed in the quarter. UBS Group remains focused on building its capital levels. Restructuring initiatives, including cost control, are encouraging.
UBS AG Price
UBS AG Price | UBS AG Quote
Currently, UBS Group AG flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Among other foreign banks, Deutsche Bank AG (DB - Free Report) , Itau Unibanco Holding S.A. (ITUB - Free Report) and The Royal Bank of Scotland Group plc are scheduled to report results on Feb 2, Feb 7 and Feb 24, respectively.
The Best Place to Start Your Stock Search
Today, you are invited to download the full list of 220 Zacks Rank #1 "Strong Buy" stocks – absolutely free of charge. Since 1988, Zacks Rank #1 stocks have nearly tripled the market, with average gains of +26% per year. Plus, you can access the list of portfolio-killing Zacks Rank #5 "Strong Sells" and other private research. See these stocks free >>