UBS Beats Costs, Loses Wealth By Investing.com

Investing.com — UBS Group AG (SIX:)’s 2024 second quarter saw mixed performance. While the Investment Banking division posted record results, fueled by strong equity and fixed income trading, other segments presented challenges.

The non-core unit beat expectations with significant reductions in risk-weighted assets and expenses, demonstrating progress in the bank’s restructuring efforts.

However, the global wealth management division faced headwinds from higher consultant compensation costs, which led to lower profits. In addition, the Swiss banking unit’s net interest income fell below expectations due to slower deposit rate adjustments.

Despite these challenges, UBS’s overall cost-cutting initiatives and asset management performance were well received by analysts at Jefferies and RBC Capital Markets, who expressed optimism about the bank’s trajectory for the rest of the year. The bank’s CET1 ratio remained strong, but Net Tangible Asset Value per share was slightly below estimates.

“UBS is delivering faster on the factors it can control – cost savings and NCL depletion – which should provide some headwinds from regulation and a potentially more challenging operating environment,” RBC analysts said.

Looking ahead, UBS maintains a cautious outlook, citing potential headwinds from net interest income and ongoing restructuring costs.

While the bank has increased its cost savings target for the year, it also faces risks associated with the Credit Suisse integration and potential economic uncertainties.

Ultimately, UBS’s valuation is a complex interplay of its strong Investment Banking performance, ongoing challenges in other divisions and the successful execution of its strategic initiatives.