UBS Earnings Preview: Here’s What to Look For

UBS Group AG (UBS) is scheduled to report second-quarter 2021 earnings on July 20.

Over the past year, shares of the Swiss bank have jumped 23.7%, trading at over $14. A solid Q2 results might propel the stock price upward, so let’s take a closer look at what analysts on the Street are expecting.

UBS Q2 Expectations

For Q2, Street expects UBS to report an adjusted EPS of $0.44. (See UBS stock charts on TipRanks)

For Q2, though UBS Group did not specify its top-line figures, the company said, “We expect our revenues in the second quarter of 2021 to be influenced by seasonal factors, such as lower client activity compared with the first quarter of 2021.”

The company further added, “With our balance sheet for all seasons and our diversified business model, UBS remains well positioned to drive sustainable long-term value for our clients and shareholders.”

Prior Quarter Snapshot

In the last-reported first quarter, UBS Group reported net profit attributable to shareholders of $1.82 billion in Q1, up 14% from $1.60 million in the prior-year quarter.

Adjusted earnings came in at $0.49 per share, which surpassed the Street’s estimates of $0.47.

The company’s performance was supported by rise in net fee and commission income, along with a 21% rise in net interest income. However, rising costs became a stumbling block.

Factors to Note about UBS

The company’s first-quarter results seem impressive with the performance of almost all the segments of UBS Group reporting profits during the quarter. It recorded higher profitability in Asset Management, Global wealth management, and Personal & Corporate banking units. However, the Investment Bank unit recorded a fall in profits.

The trend is expected to have continued in the upcoming quarter, driven by UBS Group’s strong operating fundamentals and diversified product offerings. The company’s Asset Management is expected to have continued to attract assets in Q2. The demand for the company’s flagship product and other sustainable products is expected to have risen in the upcoming quarter, driving profits in the Asset Management division.

In terms of key indicators, net interest income is expected to improve in the upcoming quarter, driven by positive lending net interest income as well as the absence of further interest rate headwinds on a sequential basis, the company said.

In addition, the company’s fee income is expected to have increased slightly in the upcoming quarter. The company is likely to have earned higher advisory and underwriting revenues, due to an increase in overall global M&A activities and equity issuances during the quarter.

The company said in its Q1 conference call, “Higher asset prices are expected to have a positive effect on recurring fee income in the company’s asset gathering businesses.” However, it is possible that the uncertain macro environment could affect both asset prices and client activity, impacting UBS Group’s fee income in Q2.

On the Swiss side, UBS Group’s Swiss business has been witnessing strong loan and deposit growth. The personal clients are increasingly utilizing UBS Group’s investment platform to invest excess deposits for return, due to the persistent negative rate environment. Those benefit the company.

Despite the aforesaid advantages, the company is likely to have kept costs up during the quarter, due to continuous investments in technology and other expansion initiatives taken up by the company. UBS expects to book restructuring expenses of around $300 million in Q2.

Analyst Recommendations

Ahead of the second-quarter earnings announcement, Jefferies analyst Flora Bocahut initiated coverage of the stock with a Buy rating and a price target of $22 (49.1% upside potential).

Bocahut believes UBS could post earnings surprises versus consensus estimates in the upcoming quarter, based on “higher revenues in global wealth management and lower costs in investment bank.”

Further, the analyst is of the opinion that the shares are attractively valued at the current levels.

Another analyst, Nicolas Payen from Kepler Capital, reiterated the stock’s price target of $20 (37.9% upside potential) and a Buy rating.        

The rest of the Street is cautiously optimistic about the stock with a Moderate Buy consensus rating based on 9 Buys, 3 Holds and 1 Sell. The average UBS price target of $18.71 implies 28.2% upside potential from the current levels.

UBS scores an 8 of 10 from TipRanks’ Smart Score rating system, indicating that the stock has strong potential to outperform market expectations.

Disclaimer: The information contained herein is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities.