UBS Stock Is Up 4.5% Since The Q1 Results, What To Expect Next?

UBS’ stock (NYSE: UBS) has lost 7% YTD, as compared to a 9% rise in the S&P500 over the same period. That said, the stock price has improved 4.5% since May 6 vs a 3.4% gain in the broader index. This came after the bank posted better-than-expected results in the first quarter of 2024, beating both the earnings and revenue estimates. Further, at the current price of $29 per share, it is trading 9% below its fair value of $32 – Trefis’ estimate for UBS’s valuation. 

Amid the current financial backdrop, UBS stock has seen extremely strong gains of 100% from levels of $15 in early January 2021 to around $30 now, vs. an increase of about 40% for the S&P 500 over this roughly 3-year period. UBS is one of a handful of stocks that have increased their value in each of the last 3 years, but that still wasn’t enough for it to consistently beat the market. Returns for the stock were 26% in 2021, 4% in 2022, and 66% in 2023. In comparison, returns for the S&P 500 have been 27% in 2021, -19% in 2022, and 24% in 2023 – indicating that UBS underperformed the S&P in 2021. In fact, consistently beating the S&P 500 – in good times and bad – has been difficult over recent years for individual stocks; for heavyweights in the Financials sector including JPM, V, and MA, and even for the megacap stars GOOG, TSLA, and MSFT. In contrast, the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has outperformed the S&P 500 each year over the same period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride as evident in HQ Portfolio performance metrics. Given the current uncertain macroeconomic environment with high oil prices and elevated interest rates, could UBS face a similar situation as it did in 2021 and underperform the S&P over the next 12 months – or will it see a strong jump?

The Swiss bank reported total revenues of $12.74 billion in the first quarter of 2024 – up 46% y-o-y. It posted higher revenues in all the segments – global wealth management (up 28%), personal & corporate banking (81%), asset management (54%), and investment bank (16%). Notably, the growth was partly because of the consolidation of Credit Suisse’s revenues of $3.8 billion, and partly due to organic growth. On the cost front, total noninterest expenses as a % of revenues witnessed a favorable drop in the quarter, leading to an adjusted net income of $1.76 billion – up 71% y-o-y.

UBS’s net revenues increased 18% y-o-y to $40.8 billion in FY2023, mainly due to a 12% rise in the wealth management unit and a 96% growth in the personal & corporate banking segment. In addition, it recorded a negative goodwill of $27.75 billion related to the acquisition of Credit Suisse, significantly benefiting the bottom line. However, the impact was partially offset by higher provisions for credit losses and an increase in operating expenses. Altogether, the adjusted net income jumped more than 250% to $27.8 billion. 

Moving forward, we expect the Q2 results to be on similar lines. Overall, UBS’ revenues are estimated to touch $46 billion in FY2024. Additionally, UBS’ adjusted net income is likely to remain around $3.5 billion. It will likely result in an annual GAAP EPS of $1.07, which coupled with a P/E multiple of just below 30x will lead to a valuation of $32.

[1] Returns as of 5/9/2024
[2] Cumulative total returns since the end of 2016

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