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UBS (UBS) Down 1.7% Since Last Earnings Report: Can It Rebound?
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A month has gone by since the last earnings report for UBS (UBS - Free Report) . Shares have lost about 1.7% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is UBS due for a breakout? 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 Q2 Earnings Decline Y/Y, Expenses Increase
UBS Group AG reported second-quarter 2020 net profit attributable to shareholders of $1.23 billion, down 11% from $1.39 billion in the prior-year quarter.
The company’s performance was impacted by a decline in net fee and commission income (down 4% year over year) along with a rise in expenses. However, higher net interest income (up 36%) was a tailwind.
It recorded higher profitability in Asset Management, Global wealth management and Investment Bank units. However, the performance of the Personal & Corporate banking unit was disappointing.
Operating Income Climbs, Expenses Rise
UBS Group’s operating income decreased 2% to $7.4 billion from the prior-year quarter.
Operating expenses rose 1% to $5.82 billion in the second quarter. Expenses included provisions for litigation, regulatory and similar matters of $2 million.
The company reported credit loss expenses of $272 million in the second quarter, up substantially from $12 million in the year-ago quarter.
Business Division Performance
Global wealth management’s operating profit before tax was $880 million, up nearly 1% year over year. Higher transaction-based income along with rise in net interest income supported results. Net new money inflows were $9.2 billion.
Asset Management’s operating profit rose 27% year over year to $157 million, supported by a substantial rise in performance fees. Also, invested assets climbed 12% to $928 billion.
Personal & Corporate banking reported operating profit before tax of $229 million, down 41% year over year. Higher credit loss expenses and lower income, were partly offset by lower operating expenses. Annualized net new business volume growth for personal banking was strong at 9.2%.
Investment Bank unit’s operating profit before tax was $612 million, up 43% from $427 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 $305 million in the quarter, which included about $90 million in costs related to higher liquidity in relation to the COVID-19 outbreak-led market stress.
Strong Capital Position
As of Jun 30, 2020, UBS Group's invested assets were $3.59 trillion, up 10.9% sequentially. Total assets decreased 3.1% to $1.06 trillion from previous quarter.
The company’s phase-in common equity tier (CET) 1 ratio was 13.3% as of Jun 30, 2020, compared with 13.7% on Jun 30, 2019. Phase-in CET 1 capital increased 7.2% year over year to $38.1 billion. Fully applied risk-weighted assets increased 10.5% to $286.4 billion from the year-ago quarter.
Outlook
The company expects credit loss expenses to remain elevated in the second half of 2020. Also, it is of opinion that higher market levels at the start of the quarter might benefit recurring fee income.
In the third quarter of 2020, management expects recurring fees to benefit from the rise in invested assets, which is expected to lead to a roughly $200 million increase sequentially.
UBS Group is taking action to improve net interest income, including loan growth, which is likely to partly offset higher liquidity costs incurred to respond to the current environment, in addition to US dollar interest rate headwinds. Further, the pandemic along with seasonality may have an impact on client activity levels in the near term.
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.
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UBS (UBS) Down 1.7% Since Last Earnings Report: Can It Rebound?
A month has gone by since the last earnings report for UBS (UBS - Free Report) . Shares have lost about 1.7% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is UBS due for a breakout? 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 Q2 Earnings Decline Y/Y, Expenses Increase
UBS Group AG reported second-quarter 2020 net profit attributable to shareholders of $1.23 billion, down 11% from $1.39 billion in the prior-year quarter.
The company’s performance was impacted by a decline in net fee and commission income (down 4% year over year) along with a rise in expenses. However, higher net interest income (up 36%) was a tailwind.
It recorded higher profitability in Asset Management, Global wealth management and Investment Bank units. However, the performance of the Personal & Corporate banking unit was disappointing.
Operating Income Climbs, Expenses Rise
UBS Group’s operating income decreased 2% to $7.4 billion from the prior-year quarter.
Operating expenses rose 1% to $5.82 billion in the second quarter. Expenses included provisions for litigation, regulatory and similar matters of $2 million.
The company reported credit loss expenses of $272 million in the second quarter, up substantially from $12 million in the year-ago quarter.
Business Division Performance
Global wealth management’s operating profit before tax was $880 million, up nearly 1% year over year. Higher transaction-based income along with rise in net interest income supported results. Net new money inflows were $9.2 billion.
Asset Management’s operating profit rose 27% year over year to $157 million, supported by a substantial rise in performance fees. Also, invested assets climbed 12% to $928 billion.
Personal & Corporate banking reported operating profit before tax of $229 million, down 41% year over year. Higher credit loss expenses and lower income, were partly offset by lower operating expenses. Annualized net new business volume growth for personal banking was strong at 9.2%.
Investment Bank unit’s operating profit before tax was $612 million, up 43% from $427 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 $305 million in the quarter, which included about $90 million in costs related to higher liquidity in relation to the COVID-19 outbreak-led market stress.
Strong Capital Position
As of Jun 30, 2020, UBS Group's invested assets were $3.59 trillion, up 10.9% sequentially. Total assets decreased 3.1% to $1.06 trillion from previous quarter.
The company’s phase-in common equity tier (CET) 1 ratio was 13.3% as of Jun 30, 2020, compared with 13.7% on Jun 30, 2019. Phase-in CET 1 capital increased 7.2% year over year to $38.1 billion. Fully applied risk-weighted assets increased 10.5% to $286.4 billion from the year-ago quarter.
Outlook
The company expects credit loss expenses to remain elevated in the second half of 2020. Also, it is of opinion that higher market levels at the start of the quarter might benefit recurring fee income.
In the third quarter of 2020, management expects recurring fees to benefit from the rise in invested assets, which is expected to lead to a roughly $200 million increase sequentially.
UBS Group is taking action to improve net interest income, including loan growth, which is likely to partly offset higher liquidity costs incurred to respond to the current environment, in addition to US dollar interest rate headwinds. Further, the pandemic along with seasonality may have an impact on client activity levels in the near term.
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.