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UBS Group (UBS) Q1 Earnings Rise Y/Y on Higher Revenues
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UBS Group AG (UBS - Free Report) reported first-quarter 2020 net profit attributable to shareholders of $1.6 billion compared with $1.14 billion in the prior-year quarter.
The company’s performance was supported by higher net interest income (up 18% year over year) along with rise in net fee and commission income (up 22%). However, higher expenses were dragging.
The company recorded higher profitability in Asset Management, Global wealth management and Investment Bank units. However, the performance of Personal & Corporate banking along with Group Functions unit was disappointing.
Operating Income Climbs, Expenses Rise
UBS Group’s operating income increased 10% to $7.93 billion from the prior-year quarter.
Operating expenses rose 4% to $5.93 billion in the first quarter. Expenses included provisions for litigation, regulatory and similar matters of $6 million.
Business Division Performance
Global wealth management’s operating profit before tax was $1.22 billion, up 41% year over year. Higher transaction-based income along with rise in net interest income supported results. Net new money inflows were $12 billion.
Asset Management’s operating profit surged 52% year over year to $157 million, supported by rise in net management and performance fees. Also, invested assets climbed 1% to $832 billion.
Personal & Corporate bankingreported operating profit before tax of $322 million, down 16% year over year. Lower transaction-based income was partially offset by higher interest income and recurring net fee income. Annualized net new business volume growth for personal banking was strong at 7.7%.
Investment Bank unit’s operating profit before tax was $709 million compared with $207 million in the prior-year quarter. Higher volumes and volatility, particularly in Foreign Exchange, Rates and Cash Equities revenues, aided bottom-line growth. Rise in expenses was a headwind.
Group Functions incurred operating loss before tax of $410 million in the quarter.
Strong Capital Position
As of Mar 31, 2020, UBS Group's invested assets were $3.24 trillion, down 10.3% sequentially. Total assets increased 13% to $972.2 billion.
The company’s phase-in common equity tier (CET) 1 ratio was 12.8% as of Mar 31, 2020, compared with 13% on Mar 31, 2020. Phase-in CET 1 capital increased 5.9% year over year to $36.7 billion. Fully applied risk-weighted assets increased 7% to $286.3 billion from the year-ago quarter.
Outlook
The company expects global GDP to contract as a result of the COVID-19 pandemic. Also, impacts on businesses and rising unemployment are expected to lead to elevated levels of credit loss expenses for the industry.
While the macroeconomic situation remains uncertain, the company expects lower asset prices to reduce its recurring fee income. Also, lower interest rates are anticipated to hamper net interest income growth, while client activity levels will likely decrease, affecting transaction-based income. UBS Group expects the continued disciplined execution of plans to help mitigate the negatives.
Our Take
The company’s first-quarter results seem impressive. Solid rise in profitability reflects its restructuring and business simplification efforts. However, the negative interest rate environment and global concerns posed as key headwinds.
Among other foreign banks, Barclays (BCS - Free Report) will report results on Apr 29. Itau Unibanco Holding S.A. (ITUB - Free Report) is scheduled to report on May 4 and Mitsubishi UFJ Financial Group (MUFG - Free Report) will report on May 15.
The Hottest Tech Mega-Trend of All
Last year, it generated $24 billion in global revenues. By 2020, it's predicted to blast through the roof to $77.6 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
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UBS Group (UBS) Q1 Earnings Rise Y/Y on Higher Revenues
UBS Group AG (UBS - Free Report) reported first-quarter 2020 net profit attributable to shareholders of $1.6 billion compared with $1.14 billion in the prior-year quarter.
The company’s performance was supported by higher net interest income (up 18% year over year) along with rise in net fee and commission income (up 22%). However, higher expenses were dragging.
The company recorded higher profitability in Asset Management, Global wealth management and Investment Bank units. However, the performance of Personal & Corporate banking along with Group Functions unit was disappointing.
Operating Income Climbs, Expenses Rise
UBS Group’s operating income increased 10% to $7.93 billion from the prior-year quarter.
Operating expenses rose 4% to $5.93 billion in the first quarter. Expenses included provisions for litigation, regulatory and similar matters of $6 million.
Business Division Performance
Global wealth management’s operating profit before tax was $1.22 billion, up 41% year over year. Higher transaction-based income along with rise in net interest income supported results. Net new money inflows were $12 billion.
Asset Management’s operating profit surged 52% year over year to $157 million, supported by rise in net management and performance fees. Also, invested assets climbed 1% to $832 billion.
Personal & Corporate bankingreported operating profit before tax of $322 million, down 16% year over year. Lower transaction-based income was partially offset by higher interest income and recurring net fee income. Annualized net new business volume growth for personal banking was strong at 7.7%.
Investment Bank unit’s operating profit before tax was $709 million compared with $207 million in the prior-year quarter. Higher volumes and volatility, particularly in Foreign Exchange, Rates and Cash Equities revenues, aided bottom-line growth. Rise in expenses was a headwind.
Group Functions incurred operating loss before tax of $410 million in the quarter.
Strong Capital Position
As of Mar 31, 2020, UBS Group's invested assets were $3.24 trillion, down 10.3% sequentially. Total assets increased 13% to $972.2 billion.
The company’s phase-in common equity tier (CET) 1 ratio was 12.8% as of Mar 31, 2020, compared with 13% on Mar 31, 2020. Phase-in CET 1 capital increased 5.9% year over year to $36.7 billion. Fully applied risk-weighted assets increased 7% to $286.3 billion from the year-ago quarter.
Outlook
The company expects global GDP to contract as a result of the COVID-19 pandemic. Also, impacts on businesses and rising unemployment are expected to lead to elevated levels of credit loss expenses for the industry.
While the macroeconomic situation remains uncertain, the company expects lower asset prices to reduce its recurring fee income. Also, lower interest rates are anticipated to hamper net interest income growth, while client activity levels will likely decrease, affecting transaction-based income. UBS Group expects the continued disciplined execution of plans to help mitigate the negatives.
Our Take
The company’s first-quarter results seem impressive. Solid rise in profitability reflects its restructuring and business simplification efforts. However, the negative interest rate environment and global concerns posed as key headwinds.
UBS Group AG Price and Consensus
UBS Group AG price-consensus-chart | UBS Group AG Quote
Currently, UBS Group carries a Zacks Rank #5 (Strong Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Among other foreign banks, Barclays (BCS - Free Report) will report results on Apr 29. Itau Unibanco Holding S.A. (ITUB - Free Report) is scheduled to report on May 4 and Mitsubishi UFJ Financial Group (MUFG - Free Report) will report on May 15.
The Hottest Tech Mega-Trend of All
Last year, it generated $24 billion in global revenues. By 2020, it's predicted to blast through the roof to $77.6 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>