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UBS Group's (UBS) Q4 Earnings Impress on Higher Revenues
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UBS Group AG (UBS - Free Report) reported fourth-quarter 2021 net profit attributable to shareholders of $1.3 billion, down 18% from the prior-year quarter’s level.
UBS’s performance was affected by higher expenses. Nonetheless, a 9% increase in net fee and commission income year over year along with a 9% rise in net interest income acted as tailwinds. Also, net credit loss release was a support.
Performance of Investment Bank and Personal & Corporate Banking divisions was impressive during the quarter. However, lower profitability was recorded in Global Wealth Management and Asset Management divisions.
In 2021, UBS Group AG reported net profit attributable to shareholders of $7.46 billion, up 14% from the 2020 figure.
Operating Income Climbs, Expenses Rise
UBS Group AG’s operating income increased 8% to $8.73 billion from the prior-year quarter’s level. Operating expenses increased 14% to $7 billion in the fourth quarter. This rise was hugely as a result of an increase in litigation provisions of $740 million taken for French investigations related to the cross-border wealth management businesses.
UBS Group AG reported net credit loss releases of $27 million in the quarter against the expense of $66 million witnessed in the year-ago quarter.
Business Division Performance
Global Wealth Management’s fourth-quarter operating profit before tax was $563 million (included litigation provisions of $657m for French investigations related to the cross-border wealth management businesses), down 35% year over year. Higher recurring net fee income and net new fee-generating assets supported UBS.
Asset Management’s operating profit of $334 million slumped 16.7% year over year, primarily due to lower performance fees. Also, invested assets increased 5% sequentially to $1.21 trillion.
Personal & Corporate Banking reported an operating profit before tax of $365 million, up 4% year over year. Revenues from credit card and foreign-exchange transactions mainly boosted the transaction-based income, marking a gradual rise in travel and leisure spending by clients as pandemic restrictions ease.
The Investment Bank unit’s operating profit before tax was $713 million, up 35% from the prior-year quarter’s level, primarily driven by higher revenues in foreign exchange, capital market financing, prime brokerage and cash equities products.
Group Functions incurred an operating loss before tax of $246 million in the reported quarter compared with the loss of $161 million witnessed in the year-ago quarter.
Strong Capital Position
As of Dec 31, 2021, UBS Group AG's invested assets improved 3.7% to $4.6 trillion from the prior quarter’s level. Total assets increased 2.6% to $1.12 trillion from the previous quarter’s level.
Common Equity Tier 1 (CET1) capital increased 15% to $45.3 billion. Risk-weighted assets decreased slightly to $302.2 billion from the prior quarter’s level. However, UBS Group AG’s CET 1 ratio was 11.9 % as of Dec 31, 2021, compared with 16.8% on Dec 31, 2020.
Our Take
UBS Group AG’s fourth-quarter performance seems impressive. Its restructuring initiatives to free resources will likely boost its operating efficiency in the quarters ahead. UBS’s $1.4-billion deal to acquire Wealthfront will accelerate its growth in the United States by strengthening its outreach among affluent investors and bolstering distribution competencies. However, prevalent negative interest rates in Switzerland act as a key headwind.
First Republic Bank’s fourth-quarter 2021 earnings per share of $2.02 surpassed the Zacks Consensus Estimate of $1.91. Additionally, the bottom line improved 26.3% from the year-ago quarter’s level.
FRC’s quarterly results were supported by a higher net interest income and non-interest income. Moreover, First Republic’s balance-sheet position was strong in the quarter. However, higher expenses and elevated net loan charge-offs were the offsetting factors.
Citigroup Inc. (C - Free Report) delivered an earnings surprise of 5.04% in fourth-quarter 2021. Income from continuing operations per share of $1.46 outpaced the Zacks Consensus Estimate of $1.39. However, the reported figure declined 24% from the prior-year quarter’s level.
Citigroup’s investment banking revenues jumped in the quarter under review, driven by equity underwriting and growth in advisory revenues. However, fixed-income revenues were down due to declining rates and spread products.
U.S. Bancorp (USB - Free Report) reported fourth-quarter 2021 earnings per share of $1.07, which missed the Zacks Consensus Estimate of $1.11. Results, however, compare favorably with the prior-year quarter’s figure of 95 cents.
Though lower revenues and escalating expenses were disappointing factors, credit quality was a tailwind. Growth in loan and deposit balance, and a strong capital position were also encouraging factors. Moreover, U.S. Bancorp closed the acquisition of San Francisco-based fintech firm TravelBank, which offers technology-driven cost and travel management solutions.
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UBS Group's (UBS) Q4 Earnings Impress on Higher Revenues
UBS Group AG (UBS - Free Report) reported fourth-quarter 2021 net profit attributable to shareholders of $1.3 billion, down 18% from the prior-year quarter’s level.
UBS’s performance was affected by higher expenses. Nonetheless, a 9% increase in net fee and commission income year over year along with a 9% rise in net interest income acted as tailwinds. Also, net credit loss release was a support.
Performance of Investment Bank and Personal & Corporate Banking divisions was impressive during the quarter. However, lower profitability was recorded in Global Wealth Management and Asset Management divisions.
In 2021, UBS Group AG reported net profit attributable to shareholders of $7.46 billion, up 14% from the 2020 figure.
Operating Income Climbs, Expenses Rise
UBS Group AG’s operating income increased 8% to $8.73 billion from the prior-year quarter’s level. Operating expenses increased 14% to $7 billion in the fourth quarter. This rise was hugely as a result of an increase in litigation provisions of $740 million taken for French investigations related to the cross-border wealth management businesses.
UBS Group AG reported net credit loss releases of $27 million in the quarter against the expense of $66 million witnessed in the year-ago quarter.
Business Division Performance
Global Wealth Management’s fourth-quarter operating profit before tax was $563 million (included litigation provisions of $657m for French investigations related to the cross-border wealth management businesses), down 35% year over year. Higher recurring net fee income and net new fee-generating assets supported UBS.
Asset Management’s operating profit of $334 million slumped 16.7% year over year, primarily due to lower performance fees. Also, invested assets increased 5% sequentially to $1.21 trillion.
Personal & Corporate Banking reported an operating profit before tax of $365 million, up 4% year over year. Revenues from credit card and foreign-exchange transactions mainly boosted the transaction-based income, marking a gradual rise in travel and leisure spending by clients as pandemic restrictions ease.
The Investment Bank unit’s operating profit before tax was $713 million, up 35% from the prior-year quarter’s level, primarily driven by higher revenues in foreign exchange, capital market financing, prime brokerage and cash equities products.
Group Functions incurred an operating loss before tax of $246 million in the reported quarter compared with the loss of $161 million witnessed in the year-ago quarter.
Strong Capital Position
As of Dec 31, 2021, UBS Group AG's invested assets improved 3.7% to $4.6 trillion from the prior quarter’s level. Total assets increased 2.6% to $1.12 trillion from the previous quarter’s level.
Common Equity Tier 1 (CET1) capital increased 15% to $45.3 billion. Risk-weighted assets decreased slightly to $302.2 billion from the prior quarter’s level. However, UBS Group AG’s CET 1 ratio was 11.9 % as of Dec 31, 2021, compared with 16.8% on Dec 31, 2020.
Our Take
UBS Group AG’s fourth-quarter performance seems impressive. Its restructuring initiatives to free resources will likely boost its operating efficiency in the quarters ahead. UBS’s $1.4-billion deal to acquire Wealthfront will accelerate its growth in the United States by strengthening its outreach among affluent investors and bolstering distribution competencies. However, prevalent negative interest rates in Switzerland act as a key headwind.
UBS Group AG Price, Consensus and EPS Surprise
UBS Group AG price-consensus-eps-surprise-chart | UBS Group AG Quote
Currently, UBS Group AG carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Banks
First Republic Bank’s fourth-quarter 2021 earnings per share of $2.02 surpassed the Zacks Consensus Estimate of $1.91. Additionally, the bottom line improved 26.3% from the year-ago quarter’s level.
FRC’s quarterly results were supported by a higher net interest income and non-interest income. Moreover, First Republic’s balance-sheet position was strong in the quarter. However, higher expenses and elevated net loan charge-offs were the offsetting factors.
Citigroup Inc. (C - Free Report) delivered an earnings surprise of 5.04% in fourth-quarter 2021. Income from continuing operations per share of $1.46 outpaced the Zacks Consensus Estimate of $1.39. However, the reported figure declined 24% from the prior-year quarter’s level.
Citigroup’s investment banking revenues jumped in the quarter under review, driven by equity underwriting and growth in advisory revenues. However, fixed-income revenues were down due to declining rates and spread products.
U.S. Bancorp (USB - Free Report) reported fourth-quarter 2021 earnings per share of $1.07, which missed the Zacks Consensus Estimate of $1.11. Results, however, compare favorably with the prior-year quarter’s figure of 95 cents.
Though lower revenues and escalating expenses were disappointing factors, credit quality was a tailwind. Growth in loan and deposit balance, and a strong capital position were also encouraging factors. Moreover, U.S. Bancorp closed the acquisition of San Francisco-based fintech firm TravelBank, which offers technology-driven cost and travel management solutions.