No JPMorgan, UBS Heads To $15 On Wealth Management Strength

May 14th, 2012 by Trefis Team
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UBS’s (NYSE:UBS) recent earnings shows the strength of its wealth management unit as the banking group has done quite well the global financial environment improves. More importantly, much of the improvement can be attributed to the bank’s cornerstone wealth management business. This is a great sign for UBS as wealth management is a much more predictable business compared to the highly volatile sales & trading business which has contributed to earnings improvements for almost all its competitors including Barclays (NYSE:BCS) and Credit Suisse (NYSE:CS).

The strong performance leads us to reiterate our $15 price estimate for UBS – a good 20% over current market prices.

See our complete analysis of UBS here

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Wealth Management Has Never Been So Profitable

UBS’s wealth management business for Swiss and international clients recorded a pre-tax profit of CHF 803 million ($866 million) for the quarter – a 70% improvement over the previous period and 24% better than for the prior-year period. The marked improvement in profitability comes from a reduction in expenses from changes in the bank’s pension plan for employees.

Moreover, the bank’s wealth management operations in the Americas region also reported record income numbers. The CHF 209 million ($225 million) pre-tax income was 34% better than that for the previous quarter and a good 76% higher than Q1 2011. The bank’s focus on growth in the region clearly paid off with the size of assets managed by the division crossing $800 million for the first time.

Sales & Trading Operations Are Also On A Comeback

UBS’s investment banking division has done pretty well for the quarter – excluding the impact of the CHF 1.1 billion ($1.2 billion) loss due to the revaluation of its own debt. The debt trading business led the improvement in the division’s figures from the front, roping in revenues of CHF 1.5 billion ($1.6 billion) for the quarter. Equity trading also earned a respectable CHF 1 billion ($1.1 billion).

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