UBS shares at four-year high after Q4 figures: best result in 15 years

Brilliant business in the fourth quarter brought the Swiss bank UBS a surprisingly good annual result. Profits climbed last year by 14 percent to 7.46 billion US dollars, as the largest Swiss bank announced on Tuesday. According to a survey conducted by the bank itself, analysts had expected a surplus of $6.98 billion. "UBS is better positioned than ever," said CEO Ralph Hamers.

The shareholders should participate in the success with a dividend increased from 0.37 to 0.50 dollars per share, as the institute announced on Tuesday in Zurich. Here, too, experts had expected less. In addition, UBS wants to buy back its own shares worth up to five billion dollars in the current year.

With the exception of Asset Management, where the sale of a division had inflated earnings in the previous year, the bank earned more in all divisions. The core business of asset management made the largest contribution to profit. Here, UBS amassed a net $107 billion in fee-generating wealth. This corresponds to a growth rate of eight percent. Despite the loss with US hedge fund Archegos, the investment bank's pre-tax profit also climbed.

Provisions are a burden

But the figures for the past fourth quarter could have been even better if the major bank had not had to make provisions for ongoing tax proceedings in France. The institute set aside 740 million dollars for this.

New, ambitious goals

UBS exceeded the goals it had set itself in the past financial year. That's why boss Hamers has now set new, ambitious targets: the return on core capital should reach 15 to 18 percent after the last 17.5 percent. In 2021, the institute already reached 17.5 percent. Hamers wants to achieve the improvement primarily through growth and not through cost reductions. The head of the bank is now aiming for a cost/income ratio of 70 to 73 (previously 75 to 78) percent. The lower this number, the more the bank takes in. In 2021 it was 73.6 percent.

Hamers is in the process of simplifying UBS, which is considered hierarchical and complex, and accelerating the decision-making processes. By 2023 he wants to save around one billion dollars gross. Hamers has also taken up the cause of increased digitization of the institute. The asset manager, which has so far mainly been geared towards the rich and super-rich in the USA, wants to enter mass business with a digital offer. UBS took a big step forward last week when it acquired robotic investment advisor Wealthfront for $1.4 billion. In the rest of the world, UBS wants to offer comparable models in the future.

Our assessment of UBS shares

The figures for the past financial year were well received by investors. After the start of trading on Tuesday, shares in the largest Swiss bank rose by more than six percent to over 18 Swiss francs (CHF). The price climbed to its highest level in four years. The UBS share is thus continuing the medium-term upward trend since the Corona slump in March 2020. Since the lows recorded then, the price has more than doubled. Since the beginning of the year, the paper has gained a good nine percent.

In addition to investors, analysts were also enthusiastic. "We are strong on fourth quarter 2021 results," Jefferies analysts said. With continued good sales dynamics, cost control is also impressive. Meanwhile, JPMorgan's Kian Abouhossein highlighted the increase in the expected dividend for 2021 and higher-than-expected share buybacks for 2022.

UBS is not alone in its good business development. Other banks, such as Deutsche Bank in this country, also achieved good results. Despite high costs for the ongoing restructuring of the group, Deutsche Bank achieved its best result in ten years. There seem to be opportunities in the banking sector at the moment. We recommend buying the share.

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