Analyst Note| Niklas Kammer, CFA |
Narrow-moat UBS reported second-quarter profits before tax of $2,615 million, missing the consensus estimate for the quarter of $3,049 million as collected by the bank itself. Compared with the same quarter a year ago, profits before tax increased by 1%. However, this was helped by a gain on a sale worth $848 million. Excluding this one-off, profits dropped about 32% year over year. Lower market valuations and lower client activities have been the culprits for this poor performance. Net fee and commission income dropped $783 million, or 14%, driven by lower activity in the investment bank, asset management, and global wealth management. We maintain our CHF 21.50 per-share fair value estimate despite this weaker-than-expected performance in the quarter. We don’t believe the risk aversion displayed by many of UBS’ clients over the last quarter will be the new normal. A recovery will take a couple of quarters, but we believe the underlying drivers behind UBS’ growth story remain intact.