UBS Investment Bank Gain Not Enough to Boost Shares: Analysts

(Bloomberg) -- A strong first-quarter performance from UBS’s investment bank was offset by weaker results from other businesses, including its global wealth-management unit, analysts say. The shares drop as much as 4.4% in Zurich -- the most since Feb. 6.

The slimmed down investment bank took advantage of rising market volatility and posted pretax profit of 589 million Swiss francs, beating the average estimate of 463 million francs. Global Wealth Management came in around 2% weaker than consensus, according to Morgan Stanley.

Vontobel, Andreas Venditti

(Buy, PT CHF22.50)

  • 1Q results solid, higher on a reported basis
  • CET1 ratio declined noticeably, but as expected and as guided by UBS due to a “number of adverse effects in the quarter”; leverage ratio increased
  • UBS highlights the large USD impact on results and says that momentum in its businesses is good and that 2Q will provide further evidence of the progress towards achieving strategic and financial targets

Morgan Stanley, Magdalena Stoklosa and Giulia Miotto

(Overweight, PT CHF23)

  • 5% underlying pretax profit miss on higher-than-expected costs
  • Investment bank strong due to solid equities and IBD and net new money delivered 2-6% growth “across the board,” while global wealth-management ~2% weaker than consensus
  • Altogether not enough to support the stock today; tone and outlook from call will be key

Baader-Helvea, Tomasz Grzelak

(Buy, PT CHF21)

  • 1Q results were “rather soft,” with the investment bank delivering a “strong beat,” and the global wealth-management unit missing expectations for assets under management and gross margin
  • Group profitability results slightly below expectations; adjusted for a higher loss in corporate center, roughly in-line
  • Capital picture is “mixed as well” with weak CET1 ratio at 13.1% and solid leverage ratio at 3.76%
  • Expects negative share price reaction today, but reiterates buy rating as Swiss lender has a “solid business outlook” and a share buyback program

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