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MarketScreener Homepage  >  Equities  >  Swiss Exchange  >  UBS Group    UBSG   CH0244767585

UBS GROUP

(UBSG)
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Diversity helps UBS defy banking gloom with profit rise

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07/23/2019 | 11:06am EDT
FILE PHOTO: A man walks past a UBS logo projected on a screen in Singapore

ZURICH (Reuters) - UBS delivered its best second-quarter results in nearly a decade on Tuesday, as strength in Swiss retail and corporate banking helped to offset weakness in wealth management.

Switzerland's biggest bank also said gains in its corporate deals business cushioned a fall in profits in investment banking - a problem area for all global banks as investors fret about slowing economies and geopolitical tensions.

"Diversification paid off again," Chief Executive Sergio Ermotti told CNBC, adding client sentiment had improved, which augured well for the third quarter.

A 1% rise in second-quarter net profit to $1.4 billion (£1.13 billion) was well ahead of analysts' consensus forecast for a 24.9% slide, according to a poll compiled by the bank, despite falls at both its flagship wealth management business and its investment bank.

UBS shares were up 2.5% in afternoon trade.

After benefiting from a shift to the traditionally steady wealth management business years ahead of rival Credit Suisse, UBS has recently been hit by a slew of troubles - from cash hoarding by its wealthy clients to a 4.5 billion euro fine it is contesting in France and a public relations disaster in China.

The bank agreed in June to pay 101 million euros to resolve a dispute over money laundering and taxes with Italy's tax authority, according to regulatory filings released with UBS's second-quarter earnings. UBS declined to comment on the settlement with Italy.

Some analysts are also questioning whether it will be able to achieve mid-term targets in wealth management set in October.

The bank is looking to cut 2019 costs by at least $300 million to boost margins. It brought general and administrative expenses down $282 million year-on-year over the first six months as it curbed spending on travel, entertainment, marketing and PR, and cut its outsourced IT workforce.

It said it expected to grow its dividend per share by a mid-single digit percentage this year, at the lower end of its mid-term goal.

WEALTH MANAGEMENT HEADWINDS

Falling U.S. interest rates have been squeezing banks, hitting net interest income and raising competition in lending. Major U.S. banks have reported falls in both revenues and profits from lower investment banking and fees.

UBS's investment bank posted a 23% profit decline, with equities revenue down 9% and foreign exchange, rates and credit down 7%, echoing soft results from Wall Street banks last week.

Advisory revenues, however, leapt 59%, as it profited from new hirings in Asia and the United States, as well as a strong deals pipeline, helping its corporate client solutions business regain lost market share.

Facing a competitive and largely saturated Swiss wealth management market and sluggish growth prospects in Europe, UBS has set its sights on expanding its business with the rich and ultra-rich in the United States, helping the Americas become the only region in which second-quarter revenues and profits were up in its flagship business.

UBS, the world's largest wealth manager, saw net new money outflows of $2 billion from April through June, as customers withdrew more than $5 billion to pay taxes.

It is also testing waters on potential partnerships in markets where it is difficult for foreign banks to gain ground, announcing a new joint venture deal with Japan's Sumitomo Mitsui Trust in June.

It is aiming for pretax profit growth in wealth management at the upper end of the unit's 10-15% target over 2019-2021, with fresh money growth at an annual rate of 2-4%.

(Reporting by Brenna Hughes Neghaiwi and John Miller; Editing by John Revill and Mark Potter)

By Brenna Hughes Neghaiwi

Stocks mentioned in the article
ChangeLast1st jan.
CREDIT SUISSE GROUP AG 1.39% 11.33 Delayed Quote.2.73%
SUMITOMO MITSUI TRUST HOLDINGS INC -0.17% 3437 End-of-day quote.-13.49%
UBS GROUP 0.92% 10.415 Delayed Quote.-16.43%
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Financials (CHF)
Sales 2019 28 842 M
EBIT 2019 5 879 M
Net income 2019 4 321 M
Debt 2019 25 590 M
Yield 2019 7,08%
P/E ratio 2019 9,17x
P/E ratio 2020 8,46x
EV / Sales2019 2,19x
EV / Sales2020 2,16x
Capitalization 37 697 M
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Technical analysis trends UBS GROUP
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Mean consensus OUTPERFORM
Number of Analysts 24
Average target price 14,32  CHF
Last Close Price 10,30  CHF
Spread / Highest target 69,5%
Spread / Average Target 39,1%
Spread / Lowest Target -1,08%
EPS Revisions
Managers
NameTitle
Sergio P. Ermotti Group Chief Executive Officer
Axel A. Weber Chairman
Sabine Keller-Busse Group Chief Operating Officer
Kirt Gardner Group Chief Financial Officer
Michel Demaré Independent Vice Chairman
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