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UBS Group (UBS) Q4 Earnings Improve Y/Y, Expenses Decline
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UBS Group AG (UBS - Free Report) reported fourth-quarter 2020 net profit attributable to shareholders of $1.71 billion, up significantly from $722 million in the prior-year quarter.
The company’s performance was supported by 16% rise in net fee and commission income year over year along with 29% rise in net interest income. Also, lower expenses posed as a tailwind. However, substantial rise in credit costs was an undermining factor.
In full-year 2020, the company reported net profit attributable to shareholders of $6.63 billion, up 54% from 2019.
Performance of all the segments of UBS Group was impressive during the quarter. It recorded higher profitability in Asset Management, Global wealth management, Personal & Corporate banking unit and Investment Bank units.
Operating Income Climbs, Expenses Fall
UBS Group’s operating income increased 15% to $8.12 billion from the prior-year quarter.
Operating expenses declined 1% to $6.06 billion in the fourth quarter. The fall was due to lower general and administrative expenses.
The company reported credit loss expenses of $66 million in the quarter, up substantially from $8 million in the year-ago quarter.
Business Division Performance
Global wealth management’s operating profit before tax was $936 million, up 22% year over year. Higher net interest income supported results. Net new money inflows were $21.1 billion.
Asset Management’s operating profit of $401 million jumped significantly year over year from $180 million, mostly driven by increase in performance fees backed by rise in Hedge Fund Businesses. Also, invested assets jumped 21% to $1.09 trillion.
Personal & Corporate banking reported operating profit before tax of $318 million, up 4% year over year. Higher transaction-based income was partly offset by rise in expenses. Annualized net new business volume growth for personal banking was decent at 4.8%.
Investment Bank unit’s operating profit before tax was $529 million against loss of $22 million in the prior-year quarter. Higher volumes and volatility, particularly in Foreign Exchange, Rates and Cash Equities revenues, aided bottom-line growth. Fall in expenses was a tailwind.
Group Functions incurred operating loss before tax of $161 million in the quarter compared with a loss of $306 million in year-ago quarter.
Strong Capital Position
As of Dec 31, 2020, UBS Group's invested assets were $4.19 trillion, up 10% sequentially. Total assets increased 5.7% to $1.13 trillion from previous quarter.
The company’s phase-in common equity tier (CET) 1 ratio was 13.8% as of Dec 31, 2020, compared with 13.7% on Dec 31, 2019. Phase-in CET 1 capital increased 12.5% to $40 billion. Fully applied risk-weighted assets increased 11.5% to $289.1 billion from the year-ago quarter.
Outlook
The company expects revenues in first-quarter 2021 to be supported by seasonal factors such as higher client activity compared with the fourth quarter of 2020. Higher asset prices might have a positive impact on recurring fee income in its asset gathering businesses.
However, the continued uncertainty in the environment is likely to affect asset prices and client activity. While supporting market sentiment, low and persistently negative interest rates and expectations of continuing easy monetary policy will remain headwinds to net interest income sequentially.
Our Take
The company’s fourth-quarter results seem impressive. Its restructuring initiatives to free resources are expected to improve its operating efficiency in the quarters ahead. However, the negative interest rate environment and global concerns posed as key headwinds.
Among other foreign banks, Barclays (BCS - Free Report) will report results on Feb 11. Itau Unibanco Holding S.A. (ITUB - Free Report) is scheduled to report on Feb 8 and Mitsubishi UFJ Financial Group (MUFG - Free Report) will report on Feb 2.
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UBS Group (UBS) Q4 Earnings Improve Y/Y, Expenses Decline
UBS Group AG (UBS - Free Report) reported fourth-quarter 2020 net profit attributable to shareholders of $1.71 billion, up significantly from $722 million in the prior-year quarter.
The company’s performance was supported by 16% rise in net fee and commission income year over year along with 29% rise in net interest income. Also, lower expenses posed as a tailwind. However, substantial rise in credit costs was an undermining factor.
In full-year 2020, the company reported net profit attributable to shareholders of $6.63 billion, up 54% from 2019.
Performance of all the segments of UBS Group was impressive during the quarter. It recorded higher profitability in Asset Management, Global wealth management, Personal & Corporate banking unit and Investment Bank units.
Operating Income Climbs, Expenses Fall
UBS Group’s operating income increased 15% to $8.12 billion from the prior-year quarter.
Operating expenses declined 1% to $6.06 billion in the fourth quarter. The fall was due to lower general and administrative expenses.
The company reported credit loss expenses of $66 million in the quarter, up substantially from $8 million in the year-ago quarter.
Business Division Performance
Global wealth management’s operating profit before tax was $936 million, up 22% year over year. Higher net interest income supported results. Net new money inflows were $21.1 billion.
Asset Management’s operating profit of $401 million jumped significantly year over year from $180 million, mostly driven by increase in performance fees backed by rise in Hedge Fund Businesses. Also, invested assets jumped 21% to $1.09 trillion.
Personal & Corporate banking reported operating profit before tax of $318 million, up 4% year over year. Higher transaction-based income was partly offset by rise in expenses. Annualized net new business volume growth for personal banking was decent at 4.8%.
Investment Bank unit’s operating profit before tax was $529 million against loss of $22 million in the prior-year quarter. Higher volumes and volatility, particularly in Foreign Exchange, Rates and Cash Equities revenues, aided bottom-line growth. Fall in expenses was a tailwind.
Group Functions incurred operating loss before tax of $161 million in the quarter compared with a loss of $306 million in year-ago quarter.
Strong Capital Position
As of Dec 31, 2020, UBS Group's invested assets were $4.19 trillion, up 10% sequentially. Total assets increased 5.7% to $1.13 trillion from previous quarter.
The company’s phase-in common equity tier (CET) 1 ratio was 13.8% as of Dec 31, 2020, compared with 13.7% on Dec 31, 2019. Phase-in CET 1 capital increased 12.5% to $40 billion. Fully applied risk-weighted assets increased 11.5% to $289.1 billion from the year-ago quarter.
Outlook
The company expects revenues in first-quarter 2021 to be supported by seasonal factors such as higher client activity compared with the fourth quarter of 2020. Higher asset prices might have a positive impact on recurring fee income in its asset gathering businesses.
However, the continued uncertainty in the environment is likely to affect asset prices and client activity. While supporting market sentiment, low and persistently negative interest rates and expectations of continuing easy monetary policy will remain headwinds to net interest income sequentially.
Our Take
The company’s fourth-quarter results seem impressive. Its restructuring initiatives to free resources are expected to improve its operating efficiency in the quarters ahead. However, the negative interest rate environment and global concerns posed as key headwinds.
UBS Group AG Price, Consensus and EPS Surprise
UBS Group AG price-consensus-eps-surprise-chart | UBS Group AG Quote
Currently, UBS Group has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Among other foreign banks, Barclays (BCS - Free Report) will report results on Feb 11. Itau Unibanco Holding S.A. (ITUB - Free Report) is scheduled to report on Feb 8 and Mitsubishi UFJ Financial Group (MUFG - Free Report) will report on Feb 2.
Just Released: Zacks’ 7 Best Stocks for Today
Experts extracted 7 stocks from the list of 220 Zacks Rank #1 Strong Buys that has beaten the market more than 2X over with a stunning average gain of +24.4% per year.
These 7 were selected because of their superior potential for immediate breakout.
See these time-sensitive tickers now >>