UBS Tumbles On “Very Poor” Results As Clients Pull $13 Billion

The parade of weak bank earnings continued on Tuesday when UBS, one of the first major European banks to report, announced that it had missed analysts’ profit estimates (though it did record a rise in full-year profits) due to outflows from its key global wealth management division.

UBS

Here’s a summary of its earnings report courtesy of Bloomberg:

  • UBS reports $7.9b in net new money outflows in global wealth management in 4Q, while asset management business saw outflows of $4.9b.
  • UBS says seen some normalization in markets in early 2019
  • Expects 1Q client activity affected by volatility, geopolitics, trade disputes
  • Market volatility remains muted, which is less conducive to client activity
  • 2018 dividend CHF0.70/shr
  • Targets to buy back $1b worth of shares in 2019 vs CHF750m in 2018
  • 4Q adj. pretax profit (excl. litigation costs) $1.01b vs company- compiled est. $1.04b
  • Global wealth management adj. pretax $912m vs est. $943m
  • Investment bank adj. pretax $30m vs est. $229m
  • Challenging markets affected equities, corporate client solutions revenues
  • 4Q adj. cost/income ratio 97%
  • Personal & corporate banking adj. pretax $375m vs est. $397m
  • Asset management adj. pretax $134m vs est. $119m
  • Investment bank adj. pre-tax profit $30 million vs $229 million company compiled est.
  • 4Q net $696m vs est. $729m
  • End-Dec. CET1 capital ratio 13.1%; CET1 leverage ratio 3.8%

The bank’s net profit attributable to shareholders for 2018 was $4.897 billion, compared with $969 million in 2017. That’s compared with a Reuters estimate of $4.906 billion. The bank warned about further weakness in its wealth management unit as it expects investors will continue to pull money out due to rising protectionism, increased market volatility and geopolitical tensions. Withdrawals at the bank’s global wealth management unit totaled almost $8 billion in Q4, while another $5 billion flowed out of it asset-management business.

UBS shares (-4.7%) led a drop in European bank shares…

UBS

…after its earnings report, which Citigroup analysts described as “very poor.”

“These are very poor results, and come as somewhat of a negative surprise so soon after the upbeat investor day,” analysts including Andrew Coombs at Citigroup wrote in a note to investors. In wealth management “the fourth quarter is usually seasonally weak, but this is disappointing.”

UBS CEO Sergio Ermotti, who is expected to face questions on succession planning on Tuesday, said the “normalization” in markets in early 2019 could benefit the bank’s bottom line for Q1.

“We have seen sine normalization in markets early in 2019, we will stay focused on balancing efficiency and investments for growth, in order to keep delivering our capital return objectives while creating sustainable long-term value for shareholders,” Sergio Ermotti, UBS chief executive officer, said in a statement Tuesday.

In an attempt to boost its sagging share price, the bank also announced its plans to purchase $1 billion of its shares in 2019, above the $751 million purchased in 2018.