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UBS Group (UBS) Q2 Earnings Fall Y/Y on Higher Costs, Revenues Up
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UBS Group AG (UBS - Free Report) reported a second-quarter 2024 net profit attributable to shareholders of $1.13 billion, which declined from $27.3 billion in the prior-year quarter. The prior-year quarter’s figure included a negative goodwill of $27.2 billion, resulting from the acquisition of Credit Suisse Group.
Results were affected due to an increase in operating expenses. Nonetheless, a rise in total revenues, driven by the acquisition of Credit Suisse acted as a tailwind. The decrease in credit loss expenses was another positive.
The performance of the Asset Management, Personal & Corporate Banking, and Investment Bank divisions was impressive. However, the non-core & Legacy, Global Wealth Management and Group items segments did not perform well.
Revenues & Expenses Rise
UBS’ total revenues jumped 24.8% year over year to $11.9 billion.
Operating expenses increased 21.8% year over year to $10.3 billion.
UBS Group reported total credit loss expenses of $95 million, which decreased 84.8% from the year-ago quarter.
Business Divisions’ Performance
Global Wealth Management’s second-quarter operating profit before tax was $871 million, down 15.3% year over year. The fall was mainly due to a rise in operating expenses, partly offset by the impact of the acquisition of the Credit Suisse Group.
In June 2024, UBS announced that it is re-aligning its wealth management business to improve its offerings to ultra-rich clients. Starting Jul 1, 2024, it will establish a new division known as GWM Solutions to consolidate different products for clients. This new unit will have alternative products from both its wealth and asset management businesses, including real estate and private market investments.
Asset Management’s operating profit before tax surged 64.6% year over year to $130 million. The rise was mainly driven by the consolidation of Credit Suisse revenues and due to a net gain from the initial portion of the sale of the Brazilian real estate fund management business.
Personal & Corporate Banking reported operating profit before tax of $703 million, up 19.2% year over year. The rise was driven by an increase in revenues, mainly due to the consolidation of Credit Suisse revenues.
The Investment Bank unit reported an operating profit before tax of $477 million against a loss of $121 million in the year-ago period. The improvement was a result of higher total revenues, partially offset by higher operating expenses.
Non-core and Legacy reported operating loss before tax of $405 million in the reported quarter compared with a loss of $493 million in the year-ago quarter.
Group items reported operating loss before tax of $377 million compared with a loss of $717 million in the year-ago quarter.
Capital Position: Mixed bag
Total assets decreased 2.9% from the previous quarter’s end to $1.56 trillion.
UBS’ return on Common Equity Tier 1 (CET1) capital was 5.9% as of Jun 30, 2024, against negative 1.4% as of Jun 30, 2023.
The risk-weighted assets declined 8.1% year over year to $511.4 billion.
The CET1 capital declined 3.2% year over year to $76.1 billion. As of Jun 30, 2024, UBS' invested assets were $5.87 trillion, up 6.2% year over year.
Our Take
UBS Group’s inorganic growth efforts will support its top line. Further, the company’s efforts to restructure its wealth management segment will support its financials. However, its elevated expense base and declining capital position are near-term concerns.
Mitsubishi UFJ Financial Group, Inc. (MUFG - Free Report) reported profits attributable to owners of the parent for first-quarter fiscal 2025 (ended Jun 30) of ¥678.1 billion ($4.35 billion), up 21.8% year over year.
MUFG’s increased gross profits, a rise in net interest income, and net fees and commissions acted as tailwinds. Also, a rise in loan and deposit balances was positive. While a decline in net trading profit and a rise in credit costs acted as a spoilsport.
Itau Unibanco Holding S.A. (ITUB - Free Report) reported recurring managerial results of R$10.1 billion ($1.93 billion) for the second quarter of 2024, up 15.2% year over year.
ITUB’s higher revenues and an increase in managerial financial margin supported the results. Rising total deposits and assets reflected a strong balance sheet position. However, an increase in non-interest expenses acted as a spoilsport.
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UBS Group (UBS) Q2 Earnings Fall Y/Y on Higher Costs, Revenues Up
UBS Group AG (UBS - Free Report) reported a second-quarter 2024 net profit attributable to shareholders of $1.13 billion, which declined from $27.3 billion in the prior-year quarter. The prior-year quarter’s figure included a negative goodwill of $27.2 billion, resulting from the acquisition of Credit Suisse Group.
Results were affected due to an increase in operating expenses. Nonetheless, a rise in total revenues, driven by the acquisition of Credit Suisse acted as a tailwind. The decrease in credit loss expenses was another positive.
The performance of the Asset Management, Personal & Corporate Banking, and Investment Bank divisions was impressive. However, the non-core & Legacy, Global Wealth Management and Group items segments did not perform well.
Revenues & Expenses Rise
UBS’ total revenues jumped 24.8% year over year to $11.9 billion.
Operating expenses increased 21.8% year over year to $10.3 billion.
UBS Group reported total credit loss expenses of $95 million, which decreased 84.8% from the year-ago quarter.
Business Divisions’ Performance
Global Wealth Management’s second-quarter operating profit before tax was $871 million, down 15.3% year over year. The fall was mainly due to a rise in operating expenses, partly offset by the impact of the acquisition of the Credit Suisse Group.
In June 2024, UBS announced that it is re-aligning its wealth management business to improve its offerings to ultra-rich clients. Starting Jul 1, 2024, it will establish a new division known as GWM Solutions to consolidate different products for clients. This new unit will have alternative products from both its wealth and asset management businesses, including real estate and private market investments.
Asset Management’s operating profit before tax surged 64.6% year over year to $130 million. The rise was mainly driven by the consolidation of Credit Suisse revenues and due to a net gain from the initial portion of the sale of the Brazilian real estate fund management business.
Personal & Corporate Banking reported operating profit before tax of $703 million, up 19.2% year over year. The rise was driven by an increase in revenues, mainly due to the consolidation of Credit Suisse revenues.
The Investment Bank unit reported an operating profit before tax of $477 million against a loss of $121 million in the year-ago period. The improvement was a result of higher total revenues, partially offset by higher operating expenses.
Non-core and Legacy reported operating loss before tax of $405 million in the reported quarter compared with a loss of $493 million in the year-ago quarter.
Group items reported operating loss before tax of $377 million compared with a loss of $717 million in the year-ago quarter.
Capital Position: Mixed bag
Total assets decreased 2.9% from the previous quarter’s end to $1.56 trillion.
UBS’ return on Common Equity Tier 1 (CET1) capital was 5.9% as of Jun 30, 2024, against negative 1.4% as of Jun 30, 2023.
The risk-weighted assets declined 8.1% year over year to $511.4 billion.
The CET1 capital declined 3.2% year over year to $76.1 billion. As of Jun 30, 2024, UBS' invested assets were $5.87 trillion, up 6.2% year over year.
Our Take
UBS Group’s inorganic growth efforts will support its top line. Further, the company’s efforts to restructure its wealth management segment will support its financials. However, its elevated expense base and declining capital position are near-term concerns.
UBS Group AG Price, Consensus and EPS Surprise
UBS Group AG price-consensus-eps-surprise-chart | UBS Group AG Quote
Currently, UBS Group carries a Zacks Rank #3 (Hold). You can see see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Foreign Banks
Mitsubishi UFJ Financial Group, Inc. (MUFG - Free Report) reported profits attributable to owners of the parent for first-quarter fiscal 2025 (ended Jun 30) of ¥678.1 billion ($4.35 billion), up 21.8% year over year.
MUFG’s increased gross profits, a rise in net interest income, and net fees and commissions acted as tailwinds. Also, a rise in loan and deposit balances was positive. While a decline in net trading profit and a rise in credit costs acted as a spoilsport.
Itau Unibanco Holding S.A. (ITUB - Free Report) reported recurring managerial results of R$10.1 billion ($1.93 billion) for the second quarter of 2024, up 15.2% year over year.
ITUB’s higher revenues and an increase in managerial financial margin supported the results. Rising total deposits and assets reflected a strong balance sheet position. However, an increase in non-interest expenses acted as a spoilsport.