) reported fourth-quarter 2013 net income attributable to
shareholders of CHF 917 million ($1.0 billion), which compared
favorably with the prior-year quarter loss of CHF 1.9 billion
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The company experienced higher net interest and trading revenues
(up 16% year over year) and elevated net fee and commission
income (up 3%). Moreover, decreased operating expenses acted as a
tailwind for the quarter.
The reported quarter recorded reduced net charges for provisions
for litigation, regulatory and similar matters of CHF 79 million
($87.4 million) as compared with CHF 2.1 billion ($2.3 billion)
in the prior-year quarter.
UBS AG's adjusted pre-tax income came in at CHF 755 million
($835.6 million) in the reported quarter compared with a loss of
CHF 1.3 billion ($1.4 billion) in the prior-year quarter.
For full-year 2013, net income attributable to shareholders was
CHF 3.2 billion ($3.5 billion), which compared favorably with the
prior-year loss of CHF 2.5 billion ($2.7 billion).
Performance in Detail
UBS AG's operating income increased 2.0% from the prior-year
quarter to CHF 6.3 billion ($7.0 billion) while operating
expenses decreased 27.0% year over year to CHF 5.9 billion ($6.5
On a year-over-year basis, adjusted operating profit before tax
increased 18% at its Wealth Management division and 59% at the
Wealth Management Americas division. However, operating profit
moved down 8% at the Retail & Corporate division and 12% for
Global Asset Management. Further, Corporate Center reported a
Moreover, at UBS AG's Investment Bank unit, the company
experienced a pre-tax profit of around CHF 297 million ($328.7
million) compared with a loss of CHF 243 million ($260.9 million)
in the prior-year quarter.
Notably, UBS AG experienced own credit loss on financial
liabilities of CHF 94 million ($104.0 million) as against CHF 414
million ($444.5 million) in the prior-year quarter. Further, the
company recorded net restructuring charges of CHF 198 million
($219.1 million) in the reported quarter versus CHF 258 million
($277.0 million) in the prior-year quarter.
As of Dec 31, 2013, UBS AG's invested assets were CHF 2,390
billion ($2,683.9 billion), up CHF 51 billion sequentially and
CHF 160 billion year over year.
The company witnessed a rise in its regulatory capital. The BIS
Basel III framework came into effect in Switzerland on Jan 1,
2013. The company's phase-in BIS Basel III common equity tier
(CET) 1 ratio stood at 18.5% as of Dec 31, 2013, compared with
15.3% in the prior-year quarter and 17.5% in the prior quarter.
Further, phase-in BIS Basel III CET 1 capital increased by CHF
2.2 billion to CHF 42.2 billion ($47.4 billion) as of Dec 31,
2013. Phase-in CET1 capital increased CHF 3.2 billion on a
sequential basis, mainly reflecting the exercise of option to
acquire the SNB StabFund's equity.
Phase-in Basel III risk -weighted assets (RWA) declined CHF 33.2
billion year over year to CHF 228.6 billion ($256.7 billion).
Yet, phase-in RWA jumped by CHF 6.3 billion sequentially, largely
reflecting incremental RWA of CHF 22.5 billion, which resulted
from the supplemental operational risk capital analysis mutually
agreed upon by UBS AG and FINMA.
On a fully applied basis, UBS AG's BIS Basel III common equity
tier 1 ratio increased 300 basis points year over year and 90
basis points sequentially to 12.8%, which surpassed the company's
target of 11.5% for 2013. Swiss systemically relevant banks (SRB)
leverage ratio stood at 4.7%, up 110 basis points year over year
and 49 basis points sequentially.
Fully applied RWA declined to CHF 225.2 billion ($252.9 billion)
from CHF 258.1 billion ($282.4 billion) as of Dec 31, 2012.
However, it increased slightly on a sequential basis by CHF 6.3
As of Dec 31, 2013, total assets stood at CHF 1,009.9 billion
($1,134.1 billion), dropping CHF 249.9 billion from Dec 31, 2012
and CHF 39.2 billion from Sep 30, 2013.
According to UBS AG, failure to attain persistent progress on
material improvements to unresolved issues in Europe, US fiscal
and monetary issues and the ongoing global concerns, as well as
the uncertainty at large, could impact the client activity levels
and trading volumes in the first quarter of 2014. Further,
revenue growth, net interest margin and net new money are also
expected to be impacted. However, it expects wealth management
businesses to continue to attract net new money.
Despite the stressed operating environment, UBS AG recorded
impressive results. The lawsuit settlements by the company during
2013 manifest its aim to resolve all mortgage related issues, and
thereby reduce costs over the upcoming period. Further, the move
is expected to provide relief to the investors who were duped by
such risky investments.
Amid the overall economic volatility and the Eurozone debt
crisis, UBS AG will focus on building its capital level.
Restructuring initiatives taken are encouraging and we believe
that such efforts would help improve the company's operating
competence in the future. Moreover, prudent business model
changes can further improve its efficiency and bolster its
UBS AG currently carries a Zacks Rank #3 (Hold). Some
better-ranked foreign banks include
Shinhan Financial Group Company Limited
Banco Bilbao Vizcaya Argentaria, S.A.
) with a Zacks Rank #1 (Strong Buy), while
Deutsche Bank AG
) carries a Zacks Rank #2 (Buy).