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UBS Q4 Earnings Decline Y/Y on Higher Expenses, Revenues Up
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UBS Group AG (UBS - Free Report) reported fourth-quarter 2023 net loss attributable to shareholders of $279 million. It recorded net profit of $1.65 billion in the year-ago quarter.
Results were adversely impacted by higher operating expenses, along with a significant rise in credit loss expenses. However, a 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, Non-core and Legacy, Investment Bank and Global Wealth Management segments did not perform well.
Revenues Improve, Expenses Rise
UBS’ total revenues increased 35.2% year over year to $10.86 billion.
Operating expenses increased 88.5% year over year to $11.47 billion.
UBS reported total credit loss expenses of $136 million in the quarter compared with $7 million in the year-ago quarter.
Business Divisions’ Performance
Global Wealth Management’s fourth-quarter operating profit before tax was $381 million, down 64% 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 7.3% year over year to $115 million. The fall was mainly due to a rise in operating expenses.
Personal & Corporate Banking reported operating profit before tax of $701 million, up 39.1% year over year. The rise was driven by an increase in revenues.
The Investment Bank unit’s operating loss before tax was $169 million. It registered operating profit of $112 million in the prior-year quarter. The fall was due to a rise in operating expenses.
Non-core and Legacy reported operating loss before tax of $1.73 billion in the reported quarter. It recorded operating profit of $33 million in the year-ago quarter.
Group items reported operating loss before tax of $140 million in the fourth-quarter. It witnessed operating profit of $81 million in the year-ago quarter.
Capital Position – Mixed Bag
Total assets increased 4.5% from the prior-quarter end to $1.72 trillion.
UBS’ return on Common Equity Tier 1 (CET1) capital was negative 1.4% as of Dec 31, 2023. The metric was 14.7% as of Dec 31, 2022.
The risk-weighted assets increased 71% year over year to $546.51 billion.
However, the CET1 capital increased 74.4% year over year to $79.26 billion. As of Dec 31, 2023, UBS' invested assets were $5.71 trillion, up 43.5% year over year.
Share Repurchase Update
In 2023, the company repurchased $1.3 billion of common stock under its share repurchase program. It expects to repurchase up to $1 billion worth of shares in 2024 post integration of Credit Suisse and UBS.
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.
Itau Unibanco Holding S.A. (ITUB - Free Report) posted recurring managerial results of R$9.4 billion ($1.89 billion) for fourth-quarter 2023, up 22.6% year over year.
ITUB’s results were supported by higher revenues and an increase in managerial financial margin. Rising total deposits and assets reflected a strong balance sheet position. However, an escalation in non-interest expenses was an offsetting factor.
Deutsche Bank (DB - Free Report) reported fourth-quarter 2023 profit attributable to its shareholders of €1.26 billion ($1.37 billion), down 30% year over year. The Germany-based lender reported profit before tax of €698 million ($759.2 million), down 10% year over year.
Results were largely driven by higher net revenues. However, higher provision for credit losses and rising expenses were the offsetting factors for DB.
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UBS Q4 Earnings Decline Y/Y on Higher Expenses, Revenues Up
UBS Group AG (UBS - Free Report) reported fourth-quarter 2023 net loss attributable to shareholders of $279 million. It recorded net profit of $1.65 billion in the year-ago quarter.
Results were adversely impacted by higher operating expenses, along with a significant rise in credit loss expenses. However, a 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, Non-core and Legacy, Investment Bank and Global Wealth Management segments did not perform well.
Revenues Improve, Expenses Rise
UBS’ total revenues increased 35.2% year over year to $10.86 billion.
Operating expenses increased 88.5% year over year to $11.47 billion.
UBS reported total credit loss expenses of $136 million in the quarter compared with $7 million in the year-ago quarter.
Business Divisions’ Performance
Global Wealth Management’s fourth-quarter operating profit before tax was $381 million, down 64% 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 7.3% year over year to $115 million. The fall was mainly due to a rise in operating expenses.
Personal & Corporate Banking reported operating profit before tax of $701 million, up 39.1% year over year. The rise was driven by an increase in revenues.
The Investment Bank unit’s operating loss before tax was $169 million. It registered operating profit of $112 million in the prior-year quarter. The fall was due to a rise in operating expenses.
Non-core and Legacy reported operating loss before tax of $1.73 billion in the reported quarter. It recorded operating profit of $33 million in the year-ago quarter.
Group items reported operating loss before tax of $140 million in the fourth-quarter. It witnessed operating profit of $81 million in the year-ago quarter.
Capital Position – Mixed Bag
Total assets increased 4.5% from the prior-quarter end to $1.72 trillion.
UBS’ return on Common Equity Tier 1 (CET1) capital was negative 1.4% as of Dec 31, 2023. The metric was 14.7% as of Dec 31, 2022.
The risk-weighted assets increased 71% year over year to $546.51 billion.
However, the CET1 capital increased 74.4% year over year to $79.26 billion. As of Dec 31, 2023, UBS' invested assets were $5.71 trillion, up 43.5% year over year.
Share Repurchase Update
In 2023, the company repurchased $1.3 billion of common stock under its share repurchase program. It expects to repurchase up to $1 billion worth of shares in 2024 post integration of Credit Suisse and UBS.
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 #4 (Sell).
You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Foreign Banks
Itau Unibanco Holding S.A. (ITUB - Free Report) posted recurring managerial results of R$9.4 billion ($1.89 billion) for fourth-quarter 2023, up 22.6% year over year.
ITUB’s results were supported by higher revenues and an increase in managerial financial margin. Rising total deposits and assets reflected a strong balance sheet position. However, an escalation in non-interest expenses was an offsetting factor.
Deutsche Bank (DB - Free Report) reported fourth-quarter 2023 profit attributable to its shareholders of €1.26 billion ($1.37 billion), down 30% year over year. The Germany-based lender reported profit before tax of €698 million ($759.2 million), down 10% year over year.
Results were largely driven by higher net revenues. However, higher provision for credit losses and rising expenses were the offsetting factors for DB.