Will UBS stock beat second quarter earnings consensus?

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UBS (NYSE: UBS) is expected to release its fiscal 2021 second quarter results on Tuesday, July 20. We expect UBS to exceed consensus estimates for both revenue and profit. The bank posted lower than expected results in the first quarter of fiscal 2021, despite year-over-year revenue and EPS growth. This was mainly explained by lower income from investment banks due to a decline in the sales and trading sub-segment, which diluted the positive effect of growth in other businesses. In particular, the company’s investment banking, asset and wealth management and core banking businesses recorded positive growth. That said, we expect sales and transaction revenue to increase in the second quarter. It, together with the growth momentum in other businesses, will boost its results for the second quarter of fiscal 2021.

Our forecast indicates that UBS valuation is about $ 18 per share, or 21% above the current market price of about $ 15. Check out our interactive dashboard analysis at UBS pre-profits: what to expect in the second quarter? for more details.

(1) Revenue is expected to exceed consensus estimates in Q2

Trefis estimates UBS’s second-quarter 2021 revenue to be around $ 8.30 billion, slightly above the consensus estimate of $ 8.20 billion. UBS’s net income for the year 2020 (income less provisions for credit losses) increased 12% year-on-year to $ 32.4 billion. This is explained by the growth of the segment of investment banking (sales and trading activities and investment banking), wealth management and asset management units. While wealth and asset management benefited from the growth in assets under management (AuM), the increase in investment banking and sales and trading is explained respectively by a volume of subscription transactions. and higher trading volumes. In addition, the bank also posted strong results in investment banking, wealth management and asset management in the first quarter of 2021. However, sales and trading activities suffered during the quarter, mainly due to a loss of $ 774 million due to the failure of the Archegos hedge fund. That said, we expect sales and trade to increase in the second quarter which, along with growth in other businesses, will boost second quarter results.

Sales and trading and investment banking are expected to experience increased trading and underwriting volumes for some time to come, before normalizing as the economy recovers. This will likely affect UBS’s growth rate, however, an increase in assets under management should offset the loss by benefiting wealth and asset management firms. Overall, we expect UBS’s revenue to reach around $ 33 billion in fiscal 2021. Our dashboard on UBS turnover offers more details on the business segments.

(2) EPS likely to exceed consensus estimates

UBS adjusted earnings per share in the second quarter of 2021 is expected to be $ 0.47 per Trefis analysis, almost 6% above the consensus estimate of $ 0.44. The bank’s profitability figures increased in 2020 thanks to higher revenues and improved operating margin. However, this growth was somewhat offset by a significant build-up of provisions for credit losses from $ 78 million to $ 694 million. The same trend also continued in the first quarter of 2021, with EPS improving 16% year-on-year to $ 0.49. In addition, the company has reduced its provisions in recent quarters due to some recovery in the economy. We expect the same trend to continue in the second quarter of fiscal 2021 results.

We expect the adjusted net margin to decrease from 20.2% in 2020 to 17.5% in fiscal 2021, leading to net income of $ 5.8 billion. It is likely to be driven by higher compensation costs and general and administrative expenses. Overall, the bank is expected to post EPS of around $ 1.59 for the year.

(3) Estimated share price 21% higher than current market price

Based on our UBS assessment, with an EPS estimate of around $ 1.59 and a P / E multiple of just over 11x in fiscal 2021, this translates to a price of $ 18, or 21% above the current market price of about $ 15.

Note: P / E multiples are based on the stock price at the end of the year and reported (or expected) adjusted earnings for the entire year

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