UBS’ stock (NYSE: UBS) has gained 11% YTD, whereas S&P500 has increased 4% over the same period. Further, at the current price of $21 per share, it is 6% below its fair value of $22 – Trefis’ estimate for UBS’s valuation. While the Swiss bank managed to beat the consensus estimates of profits in the third quarter of 2022, the total revenues decreased by 10% y-o-y to $8.24 billion. The top line suffered due to a 19% drop in the investment bank unit, followed by a 13% decline in asset management and a 4% decrease in wealth management divisions. Notably, the investment bank was down due to a 58% reduction in investment banking and a 19% fall in equity trading revenues. On the cost front, total expenses as a % of revenues witnessed a slight increase in the quarter. Overall, the adjusted net income was reduced by 24% y-o-y to $1.7 billion.
The bank’s net revenues marginally decreased to $26.5 billion in the first nine months of 2022. While the net interest income and other net income from financial instruments increased over the first three quarters, it was offset by lower net fee & commission income and a drop in investment banking-related fees. All in all, the adjusted net income fell by 2% to $5.98 billion.
The Federal Reserve and other central banks have raised the benchmark interest rates in 2022. This has helped the net interest margin of lenders, and UBS is no exception. Moving forward, we expect the Q4 results to be on similar lines as the last quarter. Notably, consensus estimates for Q4 revenues and earnings are $7.9 billion and $0.37 respectively. Altogether, we estimate UBS’ revenues to remain around $35.2 billion in FY2022. Additionally, UBS’ adjusted net income margin is likely to remain around the same level as the previous year. It will likely result in an annual GAAP EPS of $2.03, which coupled with a P/E multiple of just below 11x will lead to a valuation of $22.
|S&P 500 Return||4%||4%||78%|
|Trefis Multi-Strategy Portfolio||8%||8%||239%|
 Month-to-date and year-to-date as of 1/13/2023
 Cumulative total returns since the end of 2016