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UBS' Q2 Earnings Improve Y/Y on Higher NII, Lower Costs

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UBS Group AG (UBS - Free Report) reported second-quarter 2022 net profit attributable to shareholders of $2.1 billion, up 5% from the prior-year quarter’s level.

The company’s performance was driven by a 2% year-over-year rise in net interest income (NII). Furthermore, operating expenses decreased from the prior-year quarter.

Performance of Asset Management was impressive in the second quarter. However, lower profitability was recorded in the Global Wealth Management, Personal & Corporate Banking and Investment Bank divisions.

Total Revenues Up, Expenses Down

UBS Group AG’s total revenues marginally increased to $8.92 billion from the prior-year quarter.

Further, the operating expenses decreased 1% to $6.29 billion in the second quarter. This decrease was largely due to a decline in personnel expenses.

However, UBS Group AG reported total net credit loss expenses of $7 million in the quarter against the releases of $80 million witnessed in the year-ago quarter.

Business Divisions’ Performance

Global Wealth Management’s second-quarter operating profit before tax was $1.16 billion, down 11% year over year. The decline was due to a rise in operating expenses and a fall in transaction-based income.

Asset Management’s operating profit jumped to $959 million in the second quarter of 2022 compared with $255 million in the prior-year quarter. The rise in operating profit was primarily due to net gain from the sale of its shareholding in the Mitsubishi Corp.-UBS Realty Inc joint venture.

Personal & Corporate Banking reported an operating profit before tax of $413 million, down 17% year over year. The decrease was mainly due to a decline in other income.

The Investment Bank unit’s operating profit before tax was $410 million, down substantially from the prior-year quarter’s $668 million, mainly on a decline in total revenues in the global banking division.

Group Functions incurred an operating loss before tax of $265 million in the reported quarter compared with the loss of $158 million in the year-ago quarter.

Capital Position Deteriorates

The total assets increased 2% to $1.11 trillion from the previous quarter’s level. Common Equity Tier 1 (CET1) capital increased 5% to $44.79 billion. UBS Group AG’s return on CET1 capital was 14.2% as of Jun 30, 2022, compared with 14.5% on Jun 30, 2021. Risk-weighted assets increased 8% to $315.69 billion from the prior quarter’s level.

Nonetheless, as of Jun 30, 2022, UBS Group AG's invested assets declined 13% to $3.91 trillion from the prior quarter.

Capital Deployment Activities Encouraging

During the quarter, the company repurchased $1.63 billion of common stock under its 2022 share repurchase program.

Our Take

In the second quarter of 2022, UBS Group AG completed the sale of 49% shareholdings in Mitsubishi Corp.-UBS Realty Inc. Recently, the company reduced the exposure of new business in Russia due to the Russia-Ukraine war. Furthermore, its total revenues increased marginally, and it managed to cut its operating expenses. However, UBS’ business divisions did not perform well in the quarter.

UBS Group AG Price, Consensus and EPS Surprise

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 #4 (Sell).

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

Performance of Other Banks

M&T Bank Corporation (MTB - Free Report) reported net operating earnings per share of $3.10 for second-quarter 2022, meeting the Zacks Consensus Estimate. However, the bottom line compares unfavorably with the $3.45 per share reported in the year-ago period.

A rise in NII on net interest margin expansion and balance sheet strength drove MTB’s results. Yet a rise in expenses was a key undermining factor.

Truist Financial’s (TFC - Free Report) second-quarter 2022 adjusted earnings of $1.20 per share surpassed the Zacks Consensus Estimate of $1.17. However, TFC’s bottom line declined 22.6% from the prior-year quarter.

TFC’s results were aided by average loan growth and higher rates, which drove NII. However, lower non-interest income and a rise in provisions were the major headwinds.

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