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UBS Group (UBS) Q3 Earnings Improve Y/Y, Expenses Increase
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UBS Group AG (UBS - Free Report) reported third-quarter 2020 net profit attributable to shareholders of $2.09 billion, up significantly from $1.05 billion in the prior-year quarter.
The company’s performance was supported by a rise in net fee and commission income (up 8% year over year) along with a rise in net interest income (up 39%). However, higher expenses posed as a headwind.
It recorded higher profitability in Asset Management, Global wealth management and Investment Bank units. However, performance of the Personal & Corporate banking unit was disappointing.
Operating Income Climbs, Expenses Rise
UBS Group’s operating income increased 26% to $8.94 billion from the prior-year quarter.
Operating expenses rose 11% to $6.36 billion in the third quarter. The rise was due to higher personal expenses.
The company reported credit loss expenses of $89 million in the third quarter, up substantially from $38 million in the year-ago quarter.
Business Division Performance
Global wealth management’s operating profit before tax was $1.06 billion, up 18% year over year. Higher transaction-based income on continued high levels of client activity and greater market volatility supported results. Net new money inflows were $1.4 billion.
Asset Management’s operating profit of $739 million rose significantly year over year from $124 million, mostly driven by the sale of a majority stake in Fondcenter AG. On an adjusted basis, profits climbed 42%, supported by a substantial rise in performance fees. Also, invested assets jumped 14% to $980 billion.
Personal & Corporate banking reported operating profit before tax of $335 million, down 6% year over year. Higher credit loss expenses and operating expenses were partly offset by higher income. Annualized net new business volume growth for personal banking was decent at 5.8%.
Investment Bank unit’s operating profit before tax was $632 million, up considerably from $172 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 $184 million in the quarter compared with a loss of $200 million in year-ago quarter.
Strong Capital Position
As of Sep 30, 2020, UBS Group's invested assets were $3.81 trillion, up 6% sequentially. Total assets increased slightly to $1.07 trillion from previous quarter.
The company’s phase-in common equity tier (CET) 1 ratio was 13.5% as of Sep 30, 2020, compared with 13.1% on Sep 30, 2019. Phase-in CET 1 capital increased 10% to $38.2 billion. Fully applied risk-weighted assets increased 7% to $283.1 billion from the year-ago quarter.
Outlook
The company expects credit loss expenses to be low in the fourth quarter of 2020 compared with the first half of 2020.
UBS Group is taking action to improve net interest income, including loan growth, which is likely to partly offset the current U.S. dollar interest rate headwinds. Further, the pandemic and political uncertainties may have an impact on market volatility, which could affect client activity positively or negatively.
Our Take
The company’s third-quarter results seem decent. Its restructuring initiatives to free resources are expected to improve its operating efficiency in the quarters ahead. 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 Oct 23. Itau Unibanco Holding S.A. (ITUB - Free Report) is scheduled to report on Nov 2 and Mitsubishi UFJ Financial Group (MUFG - Free Report) will report on Nov 11.
These Stocks Are Poised to Soar Past the Pandemic
The COVID-19 outbreak has shifted consumer behavior dramatically, and a handful of high-tech companies have stepped up to keep America running. Right now, investors in these companies have a shot at serious profits. For example, Zoom jumped 108.5% in less than 4 months while most other stocks were sinking.
Our research shows that 5 cutting-edge stocks could skyrocket from the exponential increase in demand for “stay at home” technologies. This could be one of the biggest buying opportunities of this decade, especially for those who get in early.
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UBS Group (UBS) Q3 Earnings Improve Y/Y, Expenses Increase
UBS Group AG (UBS - Free Report) reported third-quarter 2020 net profit attributable to shareholders of $2.09 billion, up significantly from $1.05 billion in the prior-year quarter.
The company’s performance was supported by a rise in net fee and commission income (up 8% year over year) along with a rise in net interest income (up 39%). However, higher expenses posed as a headwind.
It recorded higher profitability in Asset Management, Global wealth management and Investment Bank units. However, performance of the Personal & Corporate banking unit was disappointing.
Operating Income Climbs, Expenses Rise
UBS Group’s operating income increased 26% to $8.94 billion from the prior-year quarter.
Operating expenses rose 11% to $6.36 billion in the third quarter. The rise was due to higher personal expenses.
The company reported credit loss expenses of $89 million in the third quarter, up substantially from $38 million in the year-ago quarter.
Business Division Performance
Global wealth management’s operating profit before tax was $1.06 billion, up 18% year over year. Higher transaction-based income on continued high levels of client activity and greater market volatility supported results. Net new money inflows were $1.4 billion.
Asset Management’s operating profit of $739 million rose significantly year over year from $124 million, mostly driven by the sale of a majority stake in Fondcenter AG. On an adjusted basis, profits climbed 42%, supported by a substantial rise in performance fees. Also, invested assets jumped 14% to $980 billion.
Personal & Corporate banking reported operating profit before tax of $335 million, down 6% year over year. Higher credit loss expenses and operating expenses were partly offset by higher income. Annualized net new business volume growth for personal banking was decent at 5.8%.
Investment Bank unit’s operating profit before tax was $632 million, up considerably from $172 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 $184 million in the quarter compared with a loss of $200 million in year-ago quarter.
Strong Capital Position
As of Sep 30, 2020, UBS Group's invested assets were $3.81 trillion, up 6% sequentially. Total assets increased slightly to $1.07 trillion from previous quarter.
The company’s phase-in common equity tier (CET) 1 ratio was 13.5% as of Sep 30, 2020, compared with 13.1% on Sep 30, 2019. Phase-in CET 1 capital increased 10% to $38.2 billion. Fully applied risk-weighted assets increased 7% to $283.1 billion from the year-ago quarter.
Outlook
The company expects credit loss expenses to be low in the fourth quarter of 2020 compared with the first half of 2020.
UBS Group is taking action to improve net interest income, including loan growth, which is likely to partly offset the current U.S. dollar interest rate headwinds. Further, the pandemic and political uncertainties may have an impact on market volatility, which could affect client activity positively or negatively.
Our Take
The company’s third-quarter results seem decent. Its restructuring initiatives to free resources are expected to improve its operating efficiency in the quarters ahead. 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 has a Zacks Rank #2 (Buy). 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 Oct 23. Itau Unibanco Holding S.A. (ITUB - Free Report) is scheduled to report on Nov 2 and Mitsubishi UFJ Financial Group (MUFG - Free Report) will report on Nov 11.
These Stocks Are Poised to Soar Past the Pandemic
The COVID-19 outbreak has shifted consumer behavior dramatically, and a handful of high-tech companies have stepped up to keep America running. Right now, investors in these companies have a shot at serious profits. For example, Zoom jumped 108.5% in less than 4 months while most other stocks were sinking.
Our research shows that 5 cutting-edge stocks could skyrocket from the exponential increase in demand for “stay at home” technologies. This could be one of the biggest buying opportunities of this decade, especially for those who get in early.
See the 5 high-tech stocks now>>