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Why Is UBS (UBS) Down 14.7% Since Last Earnings Report?
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A month has gone by since the last earnings report for UBS (UBS - Free Report) . Shares have lost about 14.7% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is UBS due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
UBS Group AG's Q4 Earnings Impress on Higher Revenues
UBS Group AG reported fourth-quarter 2021 net profit attributable to shareholders of $1.3 billion, down 18% from the prior-year quarter’s level. However, fourth quarter 2021 earnings per share of 38 cents per share compared unfavorably with 44 cents reported in the year-ago quarter.
UBS Group AG’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 NII 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 Group AG.
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.
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.
Outlook
Management projects a 2% rise in costs during 2022 (excluding litigation and foreign exchange). Restructuring costs worth $200 million and $100 million (excluding accounting asymmetries and call-out items) average quarterly loss in Group Functions, is also estimated.
A cost/income ratio of 70-73% is expected.
Profit before tax in Global Wealth Management is anticipated to grow 10-15%.
Capital guidance remains unchanged. A CET1 capital ratio of around 13% and a CET1 leverage ratio of greater than 3.7% are expected. Management projects 15-18% return on CET1 capital.
In 2022, UBS expects to repurchase shares worth $5 billion.
How Have Estimates Been Moving Since Then?
Analysts were quiet during the last two month period as none of them issued any earnings estimate revisions.
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Why Is UBS (UBS) Down 14.7% Since Last Earnings Report?
A month has gone by since the last earnings report for UBS (UBS - Free Report) . Shares have lost about 14.7% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is UBS due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
UBS Group AG's Q4 Earnings Impress on Higher Revenues
UBS Group AG reported fourth-quarter 2021 net profit attributable to shareholders of $1.3 billion, down 18% from the prior-year quarter’s level. However, fourth quarter 2021 earnings per share of 38 cents per share compared unfavorably with 44 cents reported in the year-ago quarter.
UBS Group AG’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 NII 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 Group AG.
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.
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.
Outlook
Management projects a 2% rise in costs during 2022 (excluding litigation and foreign exchange). Restructuring costs worth $200 million and $100 million (excluding accounting asymmetries and call-out items) average quarterly loss in Group Functions, is also estimated.
A cost/income ratio of 70-73% is expected.
Profit before tax in Global Wealth Management is anticipated to grow 10-15%.
Capital guidance remains unchanged. A CET1 capital ratio of around 13% and a CET1 leverage ratio of greater than 3.7% are expected. Management projects 15-18% return on CET1 capital.
In 2022, UBS expects to repurchase shares worth $5 billion.
How Have Estimates Been Moving Since Then?
Analysts were quiet during the last two month period as none of them issued any earnings estimate revisions.