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Why Is UBS (UBS) Down 3.9% Since Last Earnings Report?
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A month has gone by since the last earnings report for UBS (UBS - Free Report) . Shares have lost about 3.9% 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 the most recent earnings report in order to get a better handle on the important catalysts.
UBS Group Q2 Earnings Fall Y/Y on Higher Costs, Revenues Up
UBS Group AG 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.
Outlook
2024
The company expects 2024 NII will be roughly flat versus 4Q '23 annualized. This includes a low to mid-single-digit sequential drop in the third quarter driven by a decrease in volumes, mix shifts in anticipation of falling rates, and the impact on replication portfolios.
Medium Term
Management expects the Underlying RoCET1 2026 exit rate to be 15%.
The underlying cost-to-income ratio 2026 exit rate is expected to be less than 70%.
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.
VGM Scores
At this time, UBS has an average Growth Score of C, a grade with the same score on the momentum front. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
UBS has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
UBS is part of the Zacks Banks - Foreign industry. Over the past month, HSBC (HSBC - Free Report) , a stock from the same industry, has gained 1.2%. The company reported its results for the quarter ended June 2024 more than a month ago.
HSBC reported revenues of $16.54 billion in the last reported quarter, representing a year-over-year change of -1%. EPS of $1.65 for the same period compares with $1.70 a year ago.
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Why Is UBS (UBS) Down 3.9% Since Last Earnings Report?
A month has gone by since the last earnings report for UBS (UBS - Free Report) . Shares have lost about 3.9% 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 the most recent earnings report in order to get a better handle on the important catalysts.
UBS Group Q2 Earnings Fall Y/Y on Higher Costs, Revenues Up
UBS Group AG 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.
Outlook
2024
The company expects 2024 NII will be roughly flat versus 4Q '23 annualized. This includes a low to mid-single-digit sequential drop in the third quarter driven by a decrease in volumes, mix shifts in anticipation of falling rates, and the impact on replication portfolios.
Medium Term
Management expects the Underlying RoCET1 2026 exit rate to be 15%.
The underlying cost-to-income ratio 2026 exit rate is expected to be less than 70%.
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.
VGM Scores
At this time, UBS has an average Growth Score of C, a grade with the same score on the momentum front. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
UBS has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
UBS is part of the Zacks Banks - Foreign industry. Over the past month, HSBC (HSBC - Free Report) , a stock from the same industry, has gained 1.2%. The company reported its results for the quarter ended June 2024 more than a month ago.
HSBC reported revenues of $16.54 billion in the last reported quarter, representing a year-over-year change of -1%. EPS of $1.65 for the same period compares with $1.70 a year ago.