Impressive first-quarter 2014 earnings of
) had a minimal effect on its share price. The company reported
first-quarter 2014 net income attributable to shareholders of
CHF1.05 billion ($1.18 billion), which compared favorably with
the prior-year quarter earnings of CHF 988 million ($1.1
Decreased operating expenses reflected prudent expense
management. Further, the company experienced own credit gain on
financial liabilities. However, reduced net interest and trading
revenues (down 21% year over year) and stable net fee and
commission income was recorded.
The reported quarter recorded reduced net charges for provisions
for litigation, regulatory and similar matters of CHF 193 million
($216.2 million), down 49% year over year.
UBS AG's adjusted pre-tax income came in at CHF 1.5 billion ($1.7
billion) in the reported quarter, down 21% year over year.
Performance in Detail
UBS AG's operating income decreased 6.4% from the prior-year
quarter to CHF 7.3 billion ($8.2 billion) while operating
expenses decreased 6.3% year over year to CHF 5.9 billion ($6.6
billion). The reduction in expenses was mainly due to lower
On a year-over-year basis, adjusted operating profit before tax
decreased 4.5% at its Wealth Management division and 21.3% at the
Global Asset Management unit. However, operating profit moved up
22.9% at the Wealth Management Americas division and 10.8% at
Retail & Corporate division. Further, Corporate Center
reported a loss.
Moreover, at UBS AG's Investment Bank unit, the company
experienced an adjusted pre-tax profit of around CHF 549 million
($614.9 million), down 41% year over year.
Notably, UBS AG experienced own credit gain on financial
liabilities of CHF 88 million ($98.6 million) as against loss of
CHF 181 million ($194.6 million) in the prior-year quarter.
Further, the company recorded net restructuring charges of CHF
204 million ($228.5 million) in the reported quarter, down 17%
year over year.
As of Mar 31, 2014, UBS AG's invested assets were CHF 2,424
billion ($2,732.4 billion), up CHF 34 billion sequentially and
CHF 51 billion year over year.
The company's phase-in BIS Basel III common equity tier (CET) 1
ratio stood at 17.9% as of Mar 31, 2014, compared with 15.3% in
the prior-year quarter and 18.5% in the prior quarter.
Further, phase-in BIS Basel III CET 1 capital increased by CHF
1.0 billion to CHF 41.2 billion ($46.4 billion) as of Mar 31,
2014. Phase-in CET1 capital decreased CHF 1.0 billion on a
sequential basis, mainly reflecting the effect of capital
deductions associated with transitional effects effective from
Phase-in Basel III risk-weighted assets (RWA) declined CHF 32.6
billion year over year to CHF 229.9 billion ($259.2 billion).
Yet, phase-in RWA increased by CHF 1.3 billion sequentially,
largely reflecting increase in operational risk RWA and market
risk RWA, partly offset by reduced credit risk RWA.
On a fully applied basis, UBS AG's BIS Basel III common equity
tier 1 ratio increased 310 basis points year over year and 40
basis points sequentially to 13.2%, which surpassed the company's
target of 13.0% for 2014. Swiss systemically relevant banks (SRB)
leverage ratio stood at 5.0%, up 120 basis points year over year
and 30 basis points sequentially.
Fully applied RWA declined to CHF 226.8 billion ($255.7 billion)
from CHF 258.7 billion ($272.3 billion) as of Mar 31, 2013.
However, it increased slightly on a sequential basis by CHF 1.6
As of Mar 31, 2014, total assets stood at CHF 982.5 billion ($1.1
trillion), dropping CHF 35.9 billion from Dec 31, 2013 and CHF
231.3 billion from Mar 31, 2013.
According to UBS AG, failure to attain persistent progress on
material improvements regarding 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 second quarter of
2014. However, with the execution of its strategies, the company
expects to generate sustainable returns for shareholders.
Amid the overall economic volatility, UBS AG will focus on
building its capital level. Though restructuring initiatives are
encouraging, given the stressed operating environment, we believe
any significant improvement in earnings would remain elusive in
the upcoming quarters.
UBS AG currently carries a Zacks Rank #4 (Sell). Some
better-ranked foreign banks include
Banco Macro S.A.
Grupo Financiero Galicia S.A.
ICICI Bank Ltd.
). All 3 carry a Zacks Rank #1 (Strong Buy).
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UBS AG (UBS): Free Stock Analysis Report
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