) reported fourth quarter net loss attributable to shareholders
of CHF 1.9 billion ($2.0 billion) or CHF 0.50 per share, which
substantially lagged the prior-year quarter's profit of CHF 323
million ($354 million) or CHF 0.08 per share and compared
favorably with prior quarter's loss of CHF 2.1 billion ($2.2
billion) or CHF 0.57 per share. The quarterly results were
primarily affected by net charges for provisions for litigation
and regulatory matters as well as net restructuring charges and
own credit loss.
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However, after adjusting for own credit loss along with
restructuring and regulatory charges, UBS AG's adjusted pre-tax
loss came in at CHF 1.2 billion ($1.3 billion) in the reported
quarter. The company experienced lower net interest and trading
revenues excluding own credit, while net fee and commission
income and other income increased. Further, decreased operating
expenses acted as a tailwind for the quarter.
Notably, the company experienced own credit loss on financial
liabilities of CHF 414 million ($445 million) as against CHF 863
million ($897 million) in the prior quarter and restructuring
charges of CHF 258 million ($277 million) in the reported
quarter. Moreover, net charges for provisions for litigation,
regulatory and similar matters were CHF 2.1 billion ($2.3
For full year 2012, net loss attributable to shareholders was CHF
2.5 billion ($2.7 billion) or CHF 0.67 per share, which
substantially lagged the prior-year's profit of CHF 4.1 billion
($4.6 billion) or CHF 1.08 per share.
UBS AG's operating income fell 1.6% from the prior quarter to CHF
6.2 billion ($6.7 billion) while operating expenses dipped 9.1%
sequentially to CHF 8.0 billion ($8.6 billion). On a sequential
basis, operating profit before tax decreased 32% at its Wealth
Management division and 9% at Wealth Management Americas.
Moreover, operating profit at Retail & Corporate moved down
9%, while it escalated 18% for Global Asset Management.
However, at its Investment Bank unit, the company experienced a
pre-tax loss of around CHF 557 million ($598 million) in the
quarter. This compared with a loss of CHF 2.9 billion ($3.0
billion) in the prior quarter.
UBS AG's invested assets were CHF 2,230 billion ($2,440 billion)
as of Dec 31, 2012, down from CHF 2,242 billion ($2,385 billion)
as of Sep 30, 2012.
UBS AG saw an increase in regulatory capital. Its Basel 2.5 tier
1 capital ratio continued to improve and stood at 21.3% on Dec
31, 2012, up 110 basis points sequentially. Basel 2.5 tier 1
capital declined by CHF 1.4 billion ($1.5 billion) sequentially,
due to the company's quarterly loss and negative foreign currency
effects. As of Dec 31, 2012, balance sheet assets stood at CHF
1,259 billion ($1,378 billion), dropping CHF 107 billion ($114.9
billion) from Sep 30, 2012.
According to UBS AG, failure to attain persistent progress on
material improvements in the ongoing Eurozone sovereign debt
concerns, the European banking system and the U.S. federal budget
deficit issues, as well as the uncertainty at large, could impact
the client activity levels in the first quarter of 2013. Yet, it
expects wealth management businesses to continue to attract net
Given the stressed operating environment, we believe any
significant improvement in the earnings of UBS AG would remain
elusive in the upcoming quarters. However, prudent business model
changes can lead to improvement in efficiency and bolster its
Amidst the overall economic volatility and the Eurozone debt
crisis, the company will focus on building its capital level.
Restructuring initiatives taken during 2012 are encouraging and
we believe that such efforts would help improve the company's
operating efficiency in the future.
UBS AG currently carries a Zacks Rank #2 (Buy). Among other
Bank of Montreal
Westpac Banking Corporation
Credit Suisse Group
) also carry a Zacks Rank #2 (Buy).