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UBS Group's (UBS) Q1 Pre-Tax Earnings Up on Lower Expenses
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UBS Group AG (UBS - Free Report) reported first-quarter 2017 pre-tax operating profit of CHF 1.93 billion ($1.92 billion) on an adjusted basis, up 40.9% from the prior-year quarter.
Results reflected increase in net trading income (up 42% year over year), along with net fee and commission income (up 6% year over year). Notably, the quarter benefited from the company’s consistent focus on expense management.
Further, the Swiss banking giant’s net profit attributable to shareholders of CHF 1.27 billion ($1.26 billion), up 79.5% year over year. Results included net restructuring expenses of CHF 244 million.
The company recorded improved profitability in all divisions, including Investment Bank, Wealth Management Americas, Asset Management, Personal & Corporate banking and Wealth Management units.
Constant Cost Control Reflected, Operating Income Escalates
Excluding the significant items, UBS Group AG’s adjusted operating income increased 8.2% from the prior-year quarter to CHF 7.53 billion ($7.5 billion).
Adjusted operating expenses were almost in line with the prior-year quarter at CHF 5.6 billion ($5.6 billion). Expenses included provisions for litigation, regulatory and similar matters of CHF 33 million ($32.9 million), down 15.4% year over year.
Business Division Performance
Wealth Management Americas division’s adjusted operating profit before tax jumped 32% from the prior-year quarter figure to CHF 324 million ($322.6 million). Notably, net new money growth in the quarter was down 86% compared with the year-ago quarter.
The Asset Management unit’s adjusted operating profit improved nearly 12% year over year to CHF 123 million ($122.5 million) in the quarter, driven by lower operating expenses.
The company’s Investment Bank unit’s adjusted operating profit before tax came in at CHF 558 million ($555.6 million), up 51% from the prior-year quarter. Despite low volatility and uneven client activity levels, elevated revenues in Corporate Client Solutions and prudent cost control drove the rise.
The Wealth Management division’s adjusted operating profit before tax jumped 14% year over year to CHF 727 million ($723.9 million) in the quarter. Elevated transaction-based income and reduced operating expenses mainly led to the upsurge. Notably, net new money was down 20% year over year.
Personal & Corporate banking division’s adjusted operating profit before tax was up 4% year over year to CHF 437 million ($435.1 million). Lower operating expenses mostly offset net interest income headwinds. Notably, annualized net new business volume growth for personal banking was 6.7%.
Corporate Center reported adjusted operating loss before tax of CHF 235 million ($234 million) compared with a loss of CHF 417 million in the year-ago quarter.
Capital Position
As of Mar 31, 2017, UBS AG's invested assets were CHF 2.93 trillion ($2.94 trillion), up 11.8% year over year. Total assets were CHF 909.6 billion ($911.9 billion), decreasing around 5.9% year over year.
UBS Group’s phase-in common equity tier (CET) 1 ratio was 15.6% as of Mar 31, 2017, compared with 16.9% in the prior-year quarter. Further, phase-in CET 1 capital dipped 4.9% year over year to CHF 34.8 billion ($34.9 billion) as of Mar 31, 2017. Fully applied risk-weighted assets climbed 3.8% year over year to CHF 221.8 billion ($222.4 billion).
Outlook
Management remains concerned about geopolitical tensions and underlying macroeconomic uncertainties, which have been contributing to client risk aversion and low transaction volumes. Though investors’ sentiments have improved, a sustained increase in client activity levels is not visible. The company also highlighted several concerns, including headwinds from negative interest rates, though partially mitigated by the positive impact of increasing U.S. dollar interest rates and normalization of monetary policy. Further, the proposed changes to Swiss bank capital standards and global regulatory framework in Switzerland, will lead to higher capital requirements and expenses. However, amid a challenging operating environment, the company remains committed to the execution of its strategies.
Our Take
Results highlight a decent quarter for UBS Group with its major units displaying growth. We remain optimistic as the company managed to sustain profitability amid a number of headwinds witnessed in the quarter. UBS Group remains focused on building its capital levels. Restructuring initiatives, including cost control, are encouraging.
Among other foreign banks, Deutsche Bank AG (DB - Free Report) reported net income of €575 million ($612.6 million) in first-quarter 2017, significantly up on a year-over-year basis. Income before income taxes came in at €878 million ($935.4 million), up 52% year over year. Cost management and reduction in provisions were positive factors. However, lower revenues adversely affected the results.
Other foreign banks that are expected to release results soon include Mitsubishi UFJ Financial Group, Inc. and Itau Unibanco Holding S.A. (ITUB - Free Report) , which are scheduled to report earnings on May 15 and May 3, respectively.
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UBS Group's (UBS) Q1 Pre-Tax Earnings Up on Lower Expenses
UBS Group AG (UBS - Free Report) reported first-quarter 2017 pre-tax operating profit of CHF 1.93 billion ($1.92 billion) on an adjusted basis, up 40.9% from the prior-year quarter.
Results reflected increase in net trading income (up 42% year over year), along with net fee and commission income (up 6% year over year). Notably, the quarter benefited from the company’s consistent focus on expense management.
Further, the Swiss banking giant’s net profit attributable to shareholders of CHF 1.27 billion ($1.26 billion), up 79.5% year over year. Results included net restructuring expenses of CHF 244 million.
The company recorded improved profitability in all divisions, including Investment Bank, Wealth Management Americas, Asset Management, Personal & Corporate banking and Wealth Management units.
Constant Cost Control Reflected, Operating Income Escalates
Excluding the significant items, UBS Group AG’s adjusted operating income increased 8.2% from the prior-year quarter to CHF 7.53 billion ($7.5 billion).
Adjusted operating expenses were almost in line with the prior-year quarter at CHF 5.6 billion ($5.6 billion). Expenses included provisions for litigation, regulatory and similar matters of CHF 33 million ($32.9 million), down 15.4% year over year.
Business Division Performance
Wealth Management Americas division’s adjusted operating profit before tax jumped 32% from the prior-year quarter figure to CHF 324 million ($322.6 million). Notably, net new money growth in the quarter was down 86% compared with the year-ago quarter.
The Asset Management unit’s adjusted operating profit improved nearly 12% year over year to CHF 123 million ($122.5 million) in the quarter, driven by lower operating expenses.
The company’s Investment Bank unit’s adjusted operating profit before tax came in at CHF 558 million ($555.6 million), up 51% from the prior-year quarter. Despite low volatility and uneven client activity levels, elevated revenues in Corporate Client Solutions and prudent cost control drove the rise.
The Wealth Management division’s adjusted operating profit before tax jumped 14% year over year to CHF 727 million ($723.9 million) in the quarter. Elevated transaction-based income and reduced operating expenses mainly led to the upsurge. Notably, net new money was down 20% year over year.
Personal & Corporate banking division’s adjusted operating profit before tax was up 4% year over year to CHF 437 million ($435.1 million). Lower operating expenses mostly offset net interest income headwinds. Notably, annualized net new business volume growth for personal banking was 6.7%.
Corporate Center reported adjusted operating loss before tax of CHF 235 million ($234 million) compared with a loss of CHF 417 million in the year-ago quarter.
Capital Position
As of Mar 31, 2017, UBS AG's invested assets were CHF 2.93 trillion ($2.94 trillion), up 11.8% year over year. Total assets were CHF 909.6 billion ($911.9 billion), decreasing around 5.9% year over year.
UBS Group’s phase-in common equity tier (CET) 1 ratio was 15.6% as of Mar 31, 2017, compared with 16.9% in the prior-year quarter. Further, phase-in CET 1 capital dipped 4.9% year over year to CHF 34.8 billion ($34.9 billion) as of Mar 31, 2017. Fully applied risk-weighted assets climbed 3.8% year over year to CHF 221.8 billion ($222.4 billion).
Outlook
Management remains concerned about geopolitical tensions and underlying macroeconomic uncertainties, which have been contributing to client risk aversion and low transaction volumes. Though investors’ sentiments have improved, a sustained increase in client activity levels is not visible. The company also highlighted several concerns, including headwinds from negative interest rates, though partially mitigated by the positive impact of increasing U.S. dollar interest rates and normalization of monetary policy. Further, the proposed changes to Swiss bank capital standards and global regulatory framework in Switzerland, will lead to higher capital requirements and expenses. However, amid a challenging operating environment, the company remains committed to the execution of its strategies.
Our Take
Results highlight a decent quarter for UBS Group with its major units displaying growth. We remain optimistic as the company managed to sustain profitability amid a number of headwinds witnessed in the quarter. UBS Group remains focused on building its capital levels. Restructuring initiatives, including cost control, are encouraging.
UBS AG Price
UBS AG Price | UBS AG Quote
Currently, UBS Group AG carries a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank stocks here.
Among other foreign banks, Deutsche Bank AG (DB - Free Report) reported net income of €575 million ($612.6 million) in first-quarter 2017, significantly up on a year-over-year basis. Income before income taxes came in at €878 million ($935.4 million), up 52% year over year. Cost management and reduction in provisions were positive factors. However, lower revenues adversely affected the results.
Other foreign banks that are expected to release results soon include Mitsubishi UFJ Financial Group, Inc. and Itau Unibanco Holding S.A. (ITUB - Free Report) , which are scheduled to report earnings on May 15 and May 3, respectively.
Zacks' Hidden Trades
While we share many recommendations and ideas with the public, certain moves are hidden from everyone but selected members of our portfolio services. Would you like to peek behind the curtain today and view them? Starting now, for the next month, I invite you to follow all Zacks' private buys and sells in real time from value to momentum...from stocks under $10 to ETF to option movers...from insider trades to companies that are about to report positive earnings surprises (we've called them with 80%+ accuracy). You can even look inside portfolios so exclusive that they are normally closed to new investors.
Click here for Zacks' secret trade>>