UBS Stock Topped The Profit Estimates In Q4, Is It A Buy?

+19.36%
Upside
15.53
Market
18.54
Trefis
UBS: UBS logo
UBS
UBS

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’ valuationThe 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.

Relevant Articles
  1. UBS Stock Outperformed The Street Expectations In Q1, What’s Next?
  2. UBS Stock Is Trading Close To Its Intrinsic Value
  3. UBS Stock To Beat Street Expectations?
  4. UBS Stock Has Limited Upside
  5. UBS Stock To Beat The Revenues Consensus In Q2?
  6. Is UBS Stock Still Undervalued?

Here you’ll find our previous coverage of UBS stock, where you can track our view over time.

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 Returns Mar 2022
MTD [1]
2022
YTD [1]
2017-22
Total [2]
 UBS Return -1% 1% 35%
 S&P 500 Return 0% -9% 94%
 Trefis MS Portfolio Return -1% -11% 251%

[1] Month-to-date and year-to-date as of 3/17/2022
[2] Cumulative total returns since the end of 2016

 

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