UBS Cut Mid-Term Guidance After Missing 2019 Targets -- Earnings Review

Date : 01/21/2020 @ 1:24PM
Source : Dow Jones News
Stock : UBS Group AG (UBS)
Quote : 11.0  -0.28 (-2.48%) @ 9:44PM
After Hours
Last Trade
Last $ 11.00 ◊ 0.00 (0.00%)

UBS Cut Mid-Term Guidance After Missing 2019 Targets -- Earnings Review

UBS (NYSE:UBS)
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2 Months : From Dec 2019 to Feb 2020

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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)

Copyright (c) 2020 Dow Jones & Company, Inc.

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