We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
UBS (UBS) Up 5% Since Last Earnings Report: Can It Continue?
Read MoreHide Full Article
A month has gone by since the last earnings report for UBS (UBS - Free Report) . Shares have added about 5% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is UBS due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
UBS Group AG Q4 Earnings Decline Y/Y on Rising Costs, Revenues Up
UBS Group AG 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. Nonetheless, 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 Group AG’s 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 Group AG 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 Group AG’s return on 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 Group AG's invested assets were $5.71 trillion, up 43.5% year over year.
Medium Term and Long-Term Initiatives
With an intention to restructure its business operations, the company is winding-down its Non-Core and Legacy portfolio. This is expected to be completed by 2026-end and will likely release more than $6 billion of capital.
Further, given the optimization and unwinding benefits, risk weighted assets is expected to reduce to $510 billion in 2026 from $547 billion as of fourth-quarter 2023. Management estimates the ratio of underlying group revenues to risk weighted assets to be around 10% by 2026-end.
These, along with the integration of Credit Suisse, the company aims to achieve gross cost reductions of around $13 billion by 2026-end compared with 2022 levels. Further, it is targeting an underlying cost to income ratio of less than 70%.
Management forecasts to achieve an underlying return on CET1 capital ratio of approximately 15% and 18% by 2026-end and 2028-end, respectively. The company is aiming to achieve more than $5 trillion in invested assets in its Global Wealth Management segment by 2028.
The company is aiming to drive effective tax rate toward more normalized levels in 2025-2026. It expects the same to be less than 30% in 2025 while in 2026, the metric will likely be around 23%.
Near-Term Targets
The company is expecting to maintain CET1 capital ratio of around 14% and CET 1 leverage ratio of more than 4%
Outlook 2024
NII in dollar terms is expected to be roughly stable in the first quarter of 2024 compared with fourth-quarter 2023 levels. However, full-year 2024 NII is expected to decline by mid-single digits.
Effective tax rate is expected to remain elevated in the earlier part of the year and decrease in the later part given the consolidation of the legal entities. Management expects full-year effective tax rate to be around 40%.
How Have Estimates Been Moving Since Then?
Analysts were quiet during the last two month period as none of them issued any earnings estimate revisions.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
UBS (UBS) Up 5% Since Last Earnings Report: Can It Continue?
A month has gone by since the last earnings report for UBS (UBS - Free Report) . Shares have added about 5% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is UBS due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
UBS Group AG Q4 Earnings Decline Y/Y on Rising Costs, Revenues Up
UBS Group AG 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. Nonetheless, 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 Group AG’s 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 Group AG 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 Group AG’s return on 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 Group AG's invested assets were $5.71 trillion, up 43.5% year over year.
Medium Term and Long-Term Initiatives
With an intention to restructure its business operations, the company is winding-down its Non-Core and Legacy portfolio. This is expected to be completed by 2026-end and will likely release more than $6 billion of capital.
Further, given the optimization and unwinding benefits, risk weighted assets is expected to reduce to $510 billion in 2026 from $547 billion as of fourth-quarter 2023. Management estimates the ratio of underlying group revenues to risk weighted assets to be around 10% by 2026-end.
These, along with the integration of Credit Suisse, the company aims to achieve gross cost reductions of around $13 billion by 2026-end compared with 2022 levels. Further, it is targeting an underlying cost to income ratio of less than 70%.
Management forecasts to achieve an underlying return on CET1 capital ratio of approximately 15% and 18% by 2026-end and 2028-end, respectively. The company is aiming to achieve more than $5 trillion in invested assets in its Global Wealth Management segment by 2028.
The company is aiming to drive effective tax rate toward more normalized levels in 2025-2026. It expects the same to be less than 30% in 2025 while in 2026, the metric will likely be around 23%.
Near-Term Targets
The company is expecting to maintain CET1 capital ratio of around 14% and CET 1 leverage ratio of more than 4%
Outlook 2024
NII in dollar terms is expected to be roughly stable in the first quarter of 2024 compared with fourth-quarter 2023 levels. However, full-year 2024 NII is expected to decline by mid-single digits.
Effective tax rate is expected to remain elevated in the earlier part of the year and decrease in the later part given the consolidation of the legal entities. Management expects full-year effective tax rate to be around 40%.
How Have Estimates Been Moving Since Then?
Analysts were quiet during the last two month period as none of them issued any earnings estimate revisions.