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UBS Q3 Earnings Decline Y/Y on Higher Expenses, Revenues Up
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UBS Group AG (UBS - Free Report) reported a third-quarter 2023 net loss attributable to shareholders of $785 million against net profit of $1.7 billion recorded in the year-ago quarter.
Results were adversely affected by higher operating expenses, along with a significant rise in credit loss expenses. However, the rise in total revenues, driven in part by the acquisition of Credit Suisse was a supporting factor.
The performance of the Personal & Corporate Banking division was impressive. However, the Asset Management arm, Non-core and Legacy, the Investment Bank and Global Wealth Management segments did not perform well.
From the third quarter of 2023 onwards, the company has started reporting five business divisions, namely Global Wealth Management, Personal & Corporate Banking, Asset Management, the Investment Bank, and Non-core and Legacy. It also reports Group Items separately.
Revenues Improve, Expenses Rise
UBS’ total revenues increased 42% from the year-ago quarter to $11.7 billion.
Operating expenses increased 96.8% year over year to $11.6 billion.
UBS reported total credit loss expenses of $306 million in the quarter against credit loss release of $3 million in the year-ago quarter.
Business Divisions’ Performance
Global Wealth Management’s third-quarter operating profit before tax was $1 billion, down 30.7% year over year. The fall was mainly due to a decrease in other income and a rise in operating expenses.
Asset Management’s operating profit before tax declined 77.9% year over year to $31 million. The fall was mainly due to a rise in operating expenses.
Personal & Corporate Banking reported an operating profit before tax of $997 million, significantly up year over year. The rise was driven by an increase in revenues.
The Investment Bank unit’s operating loss before tax was $230 million against an operating profit of $447 million from the prior-year quarter. The fall was due to a decline in total revenues from global markets and a rise in operating expenses.
Non-core and Legacy reported an operating loss before tax of $1.9 billion in the reported quarter against the operating profit of $52 million in the year-ago quarter.
Group items reported an operating loss before tax of $255 million in the reported quarter compared with $210 million in the year-ago quarter.
Capital Position Worsens
Total assets decreased 2% from the previous quarter end to $1.64 trillion.
UBS’ return on CET1 capital was negative 4% as of Sep 30, 2023 compared with 15.5% as of Sep 30, 2022.
The risk-weighted assets increased 75.9% year over year to $546.5 billion.
However, the Common Equity Tier 1 (CET1) capital increased 76% year over year to $78.6 billion. As of Sep 30, 2023, UBS' invested assets were $5.37 trillion, up 44% year over year.
Our Take
UBS’ acquisition of Credit Suisse has helped enhance its capabilities in wealth and asset management and augment the company’s strategy of growing capital-light businesses. A decent capital position and efficiency initiatives will likely continue aiding its profitability.
HSBC Holdings (HSBC - Free Report) reported a third-quarter 2023 pre-tax profit of $7.7 billion, up substantially from $3.2 billion in the prior-year quarter. Last year's quarter included a $2.3 billion impairment charge relating to the planned sale of its retail banking operations in France.
HSBC’s results reflected a rise in revenues on higher interest rates and stable expected credit losses and other credit impairment charges. However, an increase in expenses was a headwind.
Deutsche Bank (DB - Free Report) reported a third-quarter 2023 profit attributable to its shareholders of €1.03 billion ($1.12 billion), down 7.5% from the year-ago quarter. The Germany-based lender reported a profit before tax of €1.72 billion ($1.88 billion), up 6.7% year over year.
Results were primarily aided by higher net revenues, lower provisions and a strong capital position. However, a rise in operating expenses was an offsetting factor for DB.
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UBS Q3 Earnings Decline Y/Y on Higher Expenses, Revenues Up
UBS Group AG (UBS - Free Report) reported a third-quarter 2023 net loss attributable to shareholders of $785 million against net profit of $1.7 billion recorded in the year-ago quarter.
Results were adversely affected by higher operating expenses, along with a significant rise in credit loss expenses. However, the rise in total revenues, driven in part by the acquisition of Credit Suisse was a supporting factor.
The performance of the Personal & Corporate Banking division was impressive. However, the Asset Management arm, Non-core and Legacy, the Investment Bank and Global Wealth Management segments did not perform well.
From the third quarter of 2023 onwards, the company has started reporting five business divisions, namely Global Wealth Management, Personal & Corporate Banking, Asset Management, the Investment Bank, and Non-core and Legacy. It also reports Group Items separately.
Revenues Improve, Expenses Rise
UBS’ total revenues increased 42% from the year-ago quarter to $11.7 billion.
Operating expenses increased 96.8% year over year to $11.6 billion.
UBS reported total credit loss expenses of $306 million in the quarter against credit loss release of $3 million in the year-ago quarter.
Business Divisions’ Performance
Global Wealth Management’s third-quarter operating profit before tax was $1 billion, down 30.7% year over year. The fall was mainly due to a decrease in other income and a rise in operating expenses.
Asset Management’s operating profit before tax declined 77.9% year over year to $31 million. The fall was mainly due to a rise in operating expenses.
Personal & Corporate Banking reported an operating profit before tax of $997 million, significantly up year over year. The rise was driven by an increase in revenues.
The Investment Bank unit’s operating loss before tax was $230 million against an operating profit of $447 million from the prior-year quarter. The fall was due to a decline in total revenues from global markets and a rise in operating expenses.
Non-core and Legacy reported an operating loss before tax of $1.9 billion in the reported quarter against the operating profit of $52 million in the year-ago quarter.
Group items reported an operating loss before tax of $255 million in the reported quarter compared with $210 million in the year-ago quarter.
Capital Position Worsens
Total assets decreased 2% from the previous quarter end to $1.64 trillion.
UBS’ return on CET1 capital was negative 4% as of Sep 30, 2023 compared with 15.5% as of Sep 30, 2022.
The risk-weighted assets increased 75.9% year over year to $546.5 billion.
However, the Common Equity Tier 1 (CET1) capital increased 76% year over year to $78.6 billion. As of Sep 30, 2023, UBS' invested assets were $5.37 trillion, up 44% year over year.
Our Take
UBS’ acquisition of Credit Suisse has helped enhance its capabilities in wealth and asset management and augment the company’s strategy of growing capital-light businesses. A decent capital position and efficiency initiatives will likely continue aiding its 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 #3 (Hold). 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 third-quarter 2023 pre-tax profit of $7.7 billion, up substantially from $3.2 billion in the prior-year quarter. Last year's quarter included a $2.3 billion impairment charge relating to the planned sale of its retail banking operations in France.
HSBC’s results reflected a rise in revenues on higher interest rates and stable expected credit losses and other credit impairment charges. However, an increase in expenses was a headwind.
Deutsche Bank (DB - Free Report) reported a third-quarter 2023 profit attributable to its shareholders of €1.03 billion ($1.12 billion), down 7.5% from the year-ago quarter. The Germany-based lender reported a profit before tax of €1.72 billion ($1.88 billion), up 6.7% year over year.
Results were primarily aided by higher net revenues, lower provisions and a strong capital position. However, a rise in operating expenses was an offsetting factor for DB.