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What's in Store for UBS Group (UBS) Stock in Q1 Earnings?

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UBS Group AG (UBS - Free Report) is scheduled to report first-quarter 2018 results on Apr 27. Results might benefit from equity market rally and improved business sentiments during the quarter. However, a persistent low rate environment in the domestic economy is likely to weigh on the bank’s revenues.

The Swiss banking giant’s fourth-quarter 2017 net profit attributable to common shareholders increased 25.2% year over year. Results primarily benefited from increase in net fees and commissions, higher trading income and efficient expense management. However, lower net interest income remained the main concern.

Looking at the price performance, UBS Group stock has gained 1.3% in six months’ time, underperforming the 2% rally of its industry.

Will the stock’s performance improve post Q1 earnings release? This majorly depends on whether the firm is able to impress the market with its results.

Factors That Might Influence Q1 Results

Low Interest Rates to Dampen Revenues: UBS Group’s top line is likely to be hit by the continued negative interest rate environment, which was adopted by the Swiss National Bank in late 2014 to boost growth and inflation of the economy. However, improvement in lending scenario during the quarter is likely to offset it to some extent.

Fee Income Might Increase Slightly: During the quarter, trading environment was decent as markets experienced higher volatility. Revenues from advisory and underwriting might be on the higher side due to an increase in overall global M&A activities and equity issuances during the quarter. Also, the Wealth Management division might benefit to some extent from the company’s consistent focus on loan growth.

However, consumer spending activities remained muted in the domestic economy due to unusually cold weather in March.

Expenses Likely to Rise: Seasonally higher compensation costs along with significant legal expenses that the bank had incurred during the quarter, are expected to keep costs up.

UBS Group carries a Zacks Rank #5 (Strong Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Among other foreign banks, Royal Bank of Scotland Group and Barclays (BCS - Free Report) are scheduled to report results on Apr 27 while Santander Consumer USA Holdings will report first-quarter earnings on Apr 24.

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