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UBS Q2 Earnings Improve Y/Y on Higher Revenues, CS Buyout
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UBS Group AG (UBS - Free Report) reported a second-quarter 2023 net profit attributable to shareholders of $28.9 billion, up significantly from the $2.1 billion recorded in the year-ago quarter.
Results reflected a rise in total revenues, driven in part by the acquisition of Credit Suisse. Higher operating expenses along with a significant rise in credit loss expenses were headwinds.
The performance of the Personal & Corporate Banking division was impressive. However, the Asset Management arm, Group Functions, the Investment Bank and Global Wealth Management segments did not perform well.
Revenues Improve, Expenses Rise
UBS’ total revenues increased 7% from the year-ago quarter to $9.5 billion.
Operating expenses increased 34.8% year over year to $8.5 billion.
UBS reported total credit loss expenses of $740 million in the quarter compared with $7 million in the year-ago quarter.
Business Divisions’ Performance
Global Wealth Management’s second-quarter operating profit before tax was $1.1 billion, down 4.1% year over year. The fall was mainly due to a decrease in recurring net fee income and transaction-based income.
Asset Management’s operating profit before tax declined 90.6% year over year to $90 million. The fall was mainly due to a decline in total revenues.
Personal & Corporate Banking reported an operating profit before tax of $612 million, up 53.8% year over year. The rise was driven by an increase in revenues.
The Investment Bank unit’s operating profit before tax was $139 million, down 66.1% 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 $495 million in the reported quarter compared with $324 million in the year-ago quarter.
Capital Position Improves
Total assets increased 59.4% from the previous-quarter end to $1.68 trillion.
The Common Equity Tier 1 (CET1) capital increased 79.2% year over year to $80.3 billion. As of Jun 30, 2023, UBS's invested assets were $5.53 trillion, up 40.6% year over year.
UBS’ return on CET1 capital was 185% as of Jun 30, 2023, compared with 18.9% as of Jun 30, 2022.
The risk-weighted assets increased 76.3% year over year to $556.6 billion.
The Acquisition of Credit Suisse
On Jun 12, UBS completed the acquisition of Credit Suisse in an all-share deal. UBS had announced the deal in March 2023 in an emergency takeover involving government-backed efforts to fend off panic in the global banking system, following the collapse of Silicon Valley Bank.
Following the deal closure, Credit Suisse shareholders were entitled to receive one UBS share for every 22.48 outstanding shares held. Credit Suisse was merged into UBS. The combined entity will operate as a consolidated banking group.
When the deal was announced, it was expected to generate an annual run rate of cost reductions of more than $8 billion by 2027. UBS expected the transaction to be accretive to EPS by 2027. The deal enhances UBS’ position in the Swiss home market.
UBS aims to substantially complete the integration process by the end of 2026. UBS further aims to achieve gross cost reductions of more than $10 billion by that time. Cumulative integration-related expenses are expected to be broadly offset by accretion-to-par effects of approximately $12 billion related to fair value adjustments applied to amortized-cost financial instruments.
Our Take
UBS’ acquisition of Credit Suisse has helped enhance capabilities in wealth and asset management, and augment the company’s strategy of growing capital-light businesses. A strong capital position and efficiency initiatives will likely continue aiding UBS’ profitability.
HSBC Holdings (HSBC - Free Report) reported a second-quarter 2023 pre-tax profit of $8.77 billion, up 89.2% from the prior-year quarter.
HSBC’s results reflected a rise in revenues on higher interest rates. Also, marginally lower expenses aided the results to some extent. However, a rise in expected credit losses and other credit impairment charges was a headwind for HSBC.
Barclays (BCS - Free Report) reported a second-quarter 2023 net income attributable to ordinary equity holders of £1.33 billion ($1.66 billion), up 24% from the prior-year quarter.
BCS recorded an increase in expenses and lower revenues in the reported quarter. Also, higher credit impairment charges hurt Barclays’ results to an extent.
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UBS Q2 Earnings Improve Y/Y on Higher Revenues, CS Buyout
UBS Group AG (UBS - Free Report) reported a second-quarter 2023 net profit attributable to shareholders of $28.9 billion, up significantly from the $2.1 billion recorded in the year-ago quarter.
Results reflected a rise in total revenues, driven in part by the acquisition of Credit Suisse. Higher operating expenses along with a significant rise in credit loss expenses were headwinds.
The performance of the Personal & Corporate Banking division was impressive. However, the Asset Management arm, Group Functions, the Investment Bank and Global Wealth Management segments did not perform well.
Revenues Improve, Expenses Rise
UBS’ total revenues increased 7% from the year-ago quarter to $9.5 billion.
Operating expenses increased 34.8% year over year to $8.5 billion.
UBS reported total credit loss expenses of $740 million in the quarter compared with $7 million in the year-ago quarter.
Business Divisions’ Performance
Global Wealth Management’s second-quarter operating profit before tax was $1.1 billion, down 4.1% year over year. The fall was mainly due to a decrease in recurring net fee income and transaction-based income.
Asset Management’s operating profit before tax declined 90.6% year over year to $90 million. The fall was mainly due to a decline in total revenues.
Personal & Corporate Banking reported an operating profit before tax of $612 million, up 53.8% year over year. The rise was driven by an increase in revenues.
The Investment Bank unit’s operating profit before tax was $139 million, down 66.1% 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 $495 million in the reported quarter compared with $324 million in the year-ago quarter.
Capital Position Improves
Total assets increased 59.4% from the previous-quarter end to $1.68 trillion.
The Common Equity Tier 1 (CET1) capital increased 79.2% year over year to $80.3 billion. As of Jun 30, 2023, UBS's invested assets were $5.53 trillion, up 40.6% year over year.
UBS’ return on CET1 capital was 185% as of Jun 30, 2023, compared with 18.9% as of Jun 30, 2022.
The risk-weighted assets increased 76.3% year over year to $556.6 billion.
The Acquisition of Credit Suisse
On Jun 12, UBS completed the acquisition of Credit Suisse in an all-share deal. UBS had announced the deal in March 2023 in an emergency takeover involving government-backed efforts to fend off panic in the global banking system, following the collapse of Silicon Valley Bank.
Following the deal closure, Credit Suisse shareholders were entitled to receive one UBS share for every 22.48 outstanding shares held. Credit Suisse was merged into UBS. The combined entity will operate as a consolidated banking group.
When the deal was announced, it was expected to generate an annual run rate of cost reductions of more than $8 billion by 2027. UBS expected the transaction to be accretive to EPS by 2027. The deal enhances UBS’ position in the Swiss home market.
UBS aims to substantially complete the integration process by the end of 2026. UBS further aims to achieve gross cost reductions of more than $10 billion by that time. Cumulative integration-related expenses are expected to be broadly offset by accretion-to-par effects of approximately $12 billion related to fair value adjustments applied to amortized-cost financial instruments.
Our Take
UBS’ acquisition of Credit Suisse has helped enhance capabilities in wealth and asset management, and augment the company’s strategy of growing capital-light businesses. A strong capital position and efficiency initiatives will likely continue aiding UBS’ profitability.
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 #2 (Buy). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Foreign Banks
HSBC Holdings (HSBC - Free Report) reported a second-quarter 2023 pre-tax profit of $8.77 billion, up 89.2% from the prior-year quarter.
HSBC’s results reflected a rise in revenues on higher interest rates. Also, marginally lower expenses aided the results to some extent. However, a rise in expected credit losses and other credit impairment charges was a headwind for HSBC.
Barclays (BCS - Free Report) reported a second-quarter 2023 net income attributable to ordinary equity holders of £1.33 billion ($1.66 billion), up 24% from the prior-year quarter.
BCS recorded an increase in expenses and lower revenues in the reported quarter. Also, higher credit impairment charges hurt Barclays’ results to an extent.