UBS Swings To Loss On CHF 2.865 billion Tax Charge

UBS Swings To Loss On CHF 2.865 billion Tax Charge
January 23, 2018

Swiss banking group UBS Group AG (NYSE: UBS) reported a swing to a net loss in the fourth-quarter of 2017, compared to a net profit in the similar period last year. Due to the new US tax laws, the bank took a charge of CHF 2.865 billion. That resulted in a GAAP net loss. Based on the overall improvement in performance, we anticipate the stock to remain in an uptrend.

For the fourth-quarter of 2017, net loss attributable to shareholders was CHF 2.224 billion, or CHF 0.60 per share, compared with a net profit of CHF 636 million, or CHF 0.17 per share in the corresponding period last year. Excluding the write-down, the 4Q17 net profit would have been CHF 641 million.

During the quarter ended December 2017, operating income of the Wealth Management segment was CHF 1.899 billion, up from CHF 1.782 billion in the year-ago period. Wealth Management Americas’ operating income increased CHF 93 million y-o-y to CHF 2.169 billion in the recent quarter. Personal & Corporate banking segment reported an operating income of CHF 986 million, an increase of CHF 45 million from last year. Asset management segment’s 4Q17 operating income increased to CHF 622 million, from CHF 499 million in the 4Q16. However, Investment banking segment’s operating income declined to CHF 1.726 billion, from CHF 2.014 billion in the prior-year’s similar quarter.

At the end of fourth-quarter, fully applied Common Equity Tier 1 ratio stood at a healthy 13.8%. The bank declared a quarterly dividend of CHF 0.65 per share, an increase of 8% y-o-y. A share buyback program for CHF 2 billion was also announced. That includes an allotment of CHF 550 million to be spent this year. The bank achieved its cost reduction target of CHF 2.1 billion. To improve the overall performance, the bank also created a unified global wealth management division.

Commenting on the creation of a global wealth management division, Sergio Ermotti, the group’s chief executive officer said
“Wealth creation in the world is set to continue to grow at least twice the GDP growth, so around 8 percent a year, and we as a leader, we are well positioned to capture superior growth, which is reflected in our targets,”

For the full year 2017, UBS recorded a net profit of CHF 1.165 billion or CHF 0.30 per share, down from CHF 3.204 billion or CHF 0.84 per share in the fiscal 2016. The Thomson Reuters consensus estimates for fiscal 2017 was CHF 1.257 billion. Excluding the write-down, the bank would have posted a 26% y-o-y increase in the net profit. Ermotti does not anticipate any change in the low-interest environment in the Europe, despite the recent rate hikes in the US. The good performance of all the business segments, strong CET1 ratio, an increase in dividend payout, and a CHF 2 billion share buyback program is expected to keep the stock bullish in the short-term.

Technically, the stock is moving above its 50-day moving average. Further, the stochastic indicator is in the bullish zone. Thus, we expect the stock to appreciate further in the near-term future.

UBS - Technical Analysis - 23rd January 2018

To trade the uptrend, we are planning to invest in a call option, which is valid for one week. We will minimise risk by opening a trade only when the stock of UBS is trading near 20 in the NYSE.

Disclaimer: The trading analysis offered here is our opinion. It is not provided as trading advice, merely an indication of our trading plan. We cannot guarantee success and we encourage traders to incorporate a strong money management strategy to limit losses. Please use this article as part of your own research before formulating strategies prior to trading.



Janine is our editor for related stock market news. Andrew and Janine will be focusing on providing the latest trends and where the next hit could be

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