UBS Cut Mid-Term Guidance After Missing 2019 Targets -- Earnings Review
January 21 2020 - 8:24AM
Dow Jones News
By Pietro Lombardi
UBS Group AG (UBS) on Tuesday released results for the fourth
quarter and the full year, the first large European bank to do so.
Here is what you need to know:
NET PROFIT: Quarterly net profit rose to $722 million from $315
million a year earlier, topping analysts' expectations of $682
million, according to a Jan. 9 consensus provided by the bank. Net
profit for the year fell almost 5% to $4.30 billion.
REVENUE: Operating income grew 1% to $7.05 billion in the
quarter. For the year, it fell to $28.89 billion from $30.21
billion.
WHAT WE WATCHED:
-TARGETS: The bank missed its key targets for 2019. It had
targeted a return on CET1 capital of around 15% and an adjusted
cost-income ratio of about 77%. Instead, return on CET1 capital was
12.4% for 2019, while the adjusted cost-income ratio stood at
78.9%.
The bank now targets a return on Common Equity Tier 1 capital of
between 12% and 15% and a cost-income ratio of 75%-78% through
2022. The bank previously guided for a 2021 return on CET1 capital
of around 17%.
"Importantly, this target has been stressed under a wide range
of market conditions, whereas the old target relied heavily on
revenue growth, half of which was expected to come from beta
factors (market appreciation & rate hikes predicated on the
forward curve). Hence, although the target has been lowered it
should, in theory, be far more reliable," Citi said.
-INVESTMENT BANK: The investment bank swung to an adjusted
pretax profit of $198 million from a loss of $5 million. CEO Sergio
Ermotti said UBS will continue to streamline the unit.
-WEALTH MANAGEMENT: The wealth management division's adjusted
pretax profit soared to $787 million from $302 million. Financial
targets for the unit weren't changed, although the bank said it
intends to continue investing in the business.
Write to Pietro Lombardi at pietro.lombardi@dowjones.com
(END) Dow Jones Newswires
January 21, 2020 08:09 ET (13:09 GMT)
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