The much anticipated UBS result was out overnight, and they provided a lot of detail around the integration of Credit Suisse and how the combined group will look in the coming years. The management call was a very long one, highlighting the huge and complicated task of merging two big and diverse global banks. The result itself was a slight miss to expectations as Q4 revenue of US$10.86bn missed consensus of $US11.29bn as both net interest income and fee & commission income trailed estimates, while costs were slightly higher than expected. The stock was down ~5% as a result, although they announced a $US1bn share buy-back as a way to appease the market in the short term.
While costs in the near term will likely be higher than analysts were expecting and should lead to slight downgrades to earnings estimates for 2024, what was clear is their longer-term thesis remains intact, with UBS on track to become a global powerhouse in wealth management targeting over $5 trillion of invested assets by 2028, which is simply huge! There was a significant emphasis on writing profitable business and being prepared to walk away from deals that don’t fit that mould, CEO Sergio Ermotti highlighting that they’ll be prepared to ‘give a little’ in revenue growth to improve returns on resources while they maintained their targeted <70% cost to income ratio by 2026.
- While a slight miss on short-term metrics, the medium-term outlook for UBS looks great, and it remains our top pick amongst global banks.
