UBS Group News: Why UBS shares are rising today

Switzerland, the investment banking pioneer UBS (NYSE:UBS) sees a sharp rise in shares on Wednesday. The underlying sentiment is strong results stemming from the company’s Q2 earnings report. Also helping is the successful consolidation of Credit Suisse, which collapsed last year amid scandals and compliance breaches. Subsequently, the rise in UBS stock demonstrates that the underlying enterprise is moving forward.

According to one CNBC report, UBS beat expectations for net profit, delivering $1.13 billion. That figure represented a substantial gap from a company-compiled consensus estimate of $528 million. One point to note, however, was that the profit was lower than the $1.75 billion shown in Q1.

First, UBS generated $11.904 billion in sales. In contrast, the consensus view of polled analysts was for revenue of $11.52 billion. That CNBC reports:

“UBS said strong capital markets activity partially offset a reduction in net interest income, which it previously signaled would be weaker due to lower lending and deposit volumes and lower Swiss interest rates.”

However, one of the main catalysts for UBS shares was the 15% increase in the bank’s global wealth management unit to $6.05 billion. In addition, sales at the investment banking unit rose 38% to $2.8 billion. Management highlighted the strengthening of Credit Suisse as a key contributor.

UBS shares rise on banking crisis

For UBS shares, the strong earnings report was likely just one component of today’s strong rally. That’s not to dismiss the results, which were impressive. However, the banking world was in a much different place in 2023, especially when it came to Credit Suisse’s troubles.

That CNN notes, the bank’s customers withdrew the equivalent of about $121 billion in the last calendar quarter of 2022. At the time, speculation on social media ran rampant that Credit Suisse was on the brink of collapse. Moreover, the US regional banking crisis triggered a new wave of exits.

Last month, UBS also revealed it had completed its merger with Credit Suisse, ending the main drama. Additionally, the Q2 earnings report highlighted that much good can still come from an ignominious situation, lifting UBS stock.

Going forward, UBS is now looking to extend the positive momentum. “We are now entering the next phase of our integration, which will be critical to achieving substantial additional cost, capital, financing and tax benefits,” said CEO Sergio Ermotti, per MarketWatch.

According to TipRanks, the consensus view for UBS stock comes in as a moderate buy. The average target price is $31.76 per share, which, given today’s popularity, represents only 3% upside. However, Goldman Sachs reiterated its bullish stance with a price target of $40.89, implying about 32% upside.

As of the date of publication, Josh Enomoto did not own (either directly or indirectly) any position in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to InvestorPlace.com Publishing Guide.

At the time of publication, the responsible editor had (either directly or indirectly) no position in the securities mentioned in this article.