UBS’ stock (NYSE: UBS) has increased marginally YTD as compared to the 9% drop in the S&P500 over the same period. Further, at its current price of $18 per share, it is trading 11% below its fair value of just above $20 – Trefis’ estimate for UBS’ valuation. The investment bank recently released its fourth-quarter results, topping the street expectations for profit. It reported net revenues of $8.7 billion – up 8% y-o-y. The wealth management revenues grew 13% y-o-y led by higher Assets under Management, followed by a 9% growth in the personal & corporate banking unit. However, the bank’s operating profits decreased 16% to $1.7 billion in the quarter. This was due to an increase in operating expenses as a % of revenues from 75% to 80%. Overall, it translated into a 21% y-o-y drop in the adjusted net income to $1.35 billion.
The company’s net revenues increased 10% y-o-y to $35.5 billion in 2021. This was due to a 14% growth in the wealth management revenues, followed by a 19% rise in personal & corporate banking and a 3% increase in the investment bank divisions. The growth in the wealth management business, which contributes more than 50% of the net revenues, was driven by a 10% increase in the Assets under management (AuM) to $3.3 trillion. While the investment banking revenues jumped 33% y-o-y, the positive impact was offset by a 35% drop in the FICC (fixed income, currency & commodity) trading. It resulted in a modest 3% rise in the total investment bank revenues. Altogether, the above revenue growth translated into a 14% y-o-y increase in the adjusted net income to $7.5 billion. This was mainly due to a favorable decrease in the total expenses as a % of revenues from 75% to 73%.
The Federal Reserve has increased the interest rates by 0.25% this week. Further, it is likely to undertake multiple interest rate hikes in FY2022. This will, in turn, benefit the net interest income of lenders. That said, the sales & trading and investment banking revenues are likely to normalize in the coming months with recovery in the economy. Overall, UBS’ revenues are expected to remain around $35.4 billion in FY2022. Additionally, UBS’ adjusted net income margin is expected to see a slight improvement in the year. It will likely result in an adjusted net income of $7.8 billion and an annual EPS of $2.15. This coupled with a P/E multiple of just below 10x will lead to the valuation of $20.
What if you’re looking for a more balanced portfolio instead? Here’s a high-quality portfolio that’s beaten the market consistently since the end of 2016.
|S&P 500 Return||0%||-9%||94%|
|Trefis MS Portfolio Return||-1%||-11%||251%|
 Month-to-date and year-to-date as of 3/17/2022
 Cumulative total returns since the end of 2016
Invest with Trefis Market Beating Portfolios
See all Trefis Price Estimates