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UBS Group AG (UBS - Free Report) reported first-quarter 2023 net profit attributable to shareholders of $1.03 billion, down 51.8% from the prior-year quarter.
The company’s quarterly performance was worrisome, as there were increases in expenses. Also, lower revenues acted as a major headwind.
The performance of the Personal & Corporate Banking division is impressive. However, the Asset Management arm, Group Functions, The Investment Bank and Global Wealth Management segments did not perform well.
Revenues Decrease & Expenses Increase
UBS’ total revenues decreased 6.8% from the prior-year quarter to $8.74 billion.
Operating expenses increased 8.7% year over year to $7.21 billion.
UBS reported total credit loss expenses of $38 million in the quarter compared with expenses of $18 million in the year-ago quarter.
Business Divisions’ Performance
Global Wealth Management’s first-quarter operating profit before tax was $1.21 billion, down 7.2% year over year. The fall was driven by a decrease in recurring net fee income and transaction-based income.
Asset Management’s operating profit before tax declined 46% year over year to $94 million. The fall was mainly due to a decline in total revenues.
Personal & Corporate Banking reported an operating profit before tax of $553 million, up 40% year over year. The rise was driven by an increase in revenues.
The Investment Bank unit’s operating profit before tax was $477 million, down 48.6% from the prior-year quarter. The fall was due to a decline in total revenues in global banking, as well as the global markets business arm.
Group Functions reported an operating loss before tax of $890 million in the reported quarter compared with a loss of $112 million in the year-ago quarter.
Capital Position Declines
Total assets decreased 4.6% from the end of the previous quarter to $1.05 trillion.
Common Equity Tier 1 (CET1) capital decreased marginally year over year to $44.59 billion. As of Mar 31, 2023, UBS's invested assets were $4.16 trillion, down 5% year over year.
UBS’ return on CET1 capital was 9.1% as of Mar 31, 2023, compared with 19% as of Mar 31, 2022.
The risk-weighted assets increased 3.1% year over year to $321.7 billion.
Capital Deployment Activities
In the reported quarter, UBS repurchased shares worth $1.3 billion. At its annual general meeting (AGM) held on Apr 5, 2023, a new two-year share repurchase program of up to $6 billion was approved by shareholders.
During the AGM, shareholders approved a dividend of 55 cents per share. The dividend was paid out on Apr 14, 2023, to shareholders of record as of Apr 13, 2023.
Our Take
UBS’ business divisions' performances in the reported quarter were discouraging. The company's decreasing revenues and rising total credit loss expenses affected its bottom-line growth. Also, the balance sheet shrunk, with a decline in total assets. The company continues to undertake initiatives to digitalize its operations. This is likely to lead to higher expenses in the upcoming period.
UBS announced a rescue deal in March 2023 to buy Credit Suisse for $3.2 billion. Completion of the transaction is subject to approvals or non-objection by regulatory and relevant competition authorities. UBS currently expects to complete the transaction in the second quarter of 2023. The company suspended share repurchases due to the anticipated acquisition of Credit Suisse.
Commerce Bancshares Inc.’s (CBSH - Free Report) first-quarter 2023 earnings per share of 95 cents surpassed the Zacks Consensus Estimate of 92 cents. The bottom line increased 3.3% from the prior-year quarter.
CBSH's results benefited from an increase in net interest income (NII) driven by a rise in loan balance and higher interest rates. Also, non-interest income grew in the quarter.
F.N.B. Corporation's (FNB - Free Report) first-quarter 2023 adjusted earnings per share of 40 cents were in line with the Zacks Consensus Estimate. The bottom line reflects a 53.8% rise from the prior-year quarter.
FNB's results were primarily aided by a rise in NII, non-interest income, higher rates and decent loan demand. The company recorded lower provisions in the quarter. However, an increase in operating expenses was a headwind.
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UBS Q1 Earnings & Revenues Decline Y/Y, Expenses Escalate
UBS Group AG (UBS - Free Report) reported first-quarter 2023 net profit attributable to shareholders of $1.03 billion, down 51.8% from the prior-year quarter.
The company’s quarterly performance was worrisome, as there were increases in expenses. Also, lower revenues acted as a major headwind.
The performance of the Personal & Corporate Banking division is impressive. However, the Asset Management arm, Group Functions, The Investment Bank and Global Wealth Management segments did not perform well.
Revenues Decrease & Expenses Increase
UBS’ total revenues decreased 6.8% from the prior-year quarter to $8.74 billion.
Operating expenses increased 8.7% year over year to $7.21 billion.
UBS reported total credit loss expenses of $38 million in the quarter compared with expenses of $18 million in the year-ago quarter.
Business Divisions’ Performance
Global Wealth Management’s first-quarter operating profit before tax was $1.21 billion, down 7.2% year over year. The fall was driven by a decrease in recurring net fee income and transaction-based income.
Asset Management’s operating profit before tax declined 46% year over year to $94 million. The fall was mainly due to a decline in total revenues.
Personal & Corporate Banking reported an operating profit before tax of $553 million, up 40% year over year. The rise was driven by an increase in revenues.
The Investment Bank unit’s operating profit before tax was $477 million, down 48.6% from the prior-year quarter. The fall was due to a decline in total revenues in global banking, as well as the global markets business arm.
Group Functions reported an operating loss before tax of $890 million in the reported quarter compared with a loss of $112 million in the year-ago quarter.
Capital Position Declines
Total assets decreased 4.6% from the end of the previous quarter to $1.05 trillion.
Common Equity Tier 1 (CET1) capital decreased marginally year over year to $44.59 billion. As of Mar 31, 2023, UBS's invested assets were $4.16 trillion, down 5% year over year.
UBS’ return on CET1 capital was 9.1% as of Mar 31, 2023, compared with 19% as of Mar 31, 2022.
The risk-weighted assets increased 3.1% year over year to $321.7 billion.
Capital Deployment Activities
In the reported quarter, UBS repurchased shares worth $1.3 billion. At its annual general meeting (AGM) held on Apr 5, 2023, a new two-year share repurchase program of up to $6 billion was approved by shareholders.
During the AGM, shareholders approved a dividend of 55 cents per share. The dividend was paid out on Apr 14, 2023, to shareholders of record as of Apr 13, 2023.
Our Take
UBS’ business divisions' performances in the reported quarter were discouraging. The company's decreasing revenues and rising total credit loss expenses affected its bottom-line growth. Also, the balance sheet shrunk, with a decline in total assets. The company continues to undertake initiatives to digitalize its operations. This is likely to lead to higher expenses in the upcoming period.
UBS announced a rescue deal in March 2023 to buy Credit Suisse for $3.2 billion. Completion of the transaction is subject to approvals or non-objection by regulatory and relevant competition authorities. UBS currently expects to complete the transaction in the second quarter of 2023. The company suspended share repurchases due to the anticipated acquisition of Credit Suisse.
UBS Group AG Price, Consensus and EPS Surprise
UBS Group AG price-consensus-eps-surprise-chart | UBS Group AG Quote
Currently, UBS carries a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Banks
Commerce Bancshares Inc.’s (CBSH - Free Report) first-quarter 2023 earnings per share of 95 cents surpassed the Zacks Consensus Estimate of 92 cents. The bottom line increased 3.3% from the prior-year quarter.
CBSH's results benefited from an increase in net interest income (NII) driven by a rise in loan balance and higher interest rates. Also, non-interest income grew in the quarter.
F.N.B. Corporation's (FNB - Free Report) first-quarter 2023 adjusted earnings per share of 40 cents were in line with the Zacks Consensus Estimate. The bottom line reflects a 53.8% rise from the prior-year quarter.
FNB's results were primarily aided by a rise in NII, non-interest income, higher rates and decent loan demand. The company recorded lower provisions in the quarter. However, an increase in operating expenses was a headwind.