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UBS Group AG Earnings - Analysis & Highlights for Q3 2024
Overview
PositivesNegativesOutlook
- Total revenues increased by 7% with higher recurring net fee income and double-digit growth in transactional revenues more than offsetting NII headwinds.
- Revenues in markets increased by 31% to $1.9 billion, driven by client activity and the strength of the expanded franchise.
- Net new money in Q3 was positive $2 billion, with strong inflows in money markets and positive contribution from China JVs more than offsetting outflows in equities.
- Underlying operating expenses dropped by 4% compared to Q2, excluding compensation-related and currency translation effects.
- The company had smaller outflows in the quarter, still about $1 billion of outflows.
- The company's guidance for Q4 is largely driven by the impact of rates.
- The company's Credit Swiss client advisors leaving for some period of time, which is a headwind on net new assets.
- The company expects to recognize total pull to par revenues of $6.4 billion over the next several years, benefiting net profit, equity, and CET1 capital.
- The company expects to retain 85% of the $60 billion in deposit volumes maturing in the quarter, including converting 20% into more profitable mandates, structured products, and other liquidity solutions.
- The company expects to benefit from decommissioning software, hardware, and data centers, and by unlocking further staff capacity.
- The company expects to attract strong net new assets while continuing to absorb integration-related headwinds.
- The company expects to accelerate the phase out of the transaction - transitional capital adjustment on the aforementioned positions, which will fully accrete into capital in future periods, reversing the impact seen in this quarter's results.
Q&A Highlights from UBS Group AG Earnings Call Q3 2024
- Analyst asked about the company's plans for a share buyback program in 2025 and how it fits into the regulatory regime changes that might come in the future.
- Sergio P. Ermotti, the CEO of UBS Group Inc., reiterated the company's commitment to having a share buyback program in 2025, but stated that the timing and amount of the buyback would depend on the regulatory environment in Switzerland. He noted that the company's ambition is to have similar returns by 2026 as it had before the acquisitions.
- Sergio P. Ermotti, the CEO of UBS Group Inc., reiterated the company's commitment to having a share buyback program in 2025, but stated that the timing and amount of the buyback would depend on the regulatory environment in Switzerland. He noted that the company's ambition is to have similar returns by 2026 as it had before the acquisitions.
- Analyst asked about the impact of lower rates on the company's US Wealth business.
- Todd Tuckner, the CFO of UBS Group Inc., stated that lower rates would spur additional lending opportunities across the division, including in the US. He also noted that the company would continue to see sweeps balance taper, if not starting to grow, as rates come down.
- Todd Tuckner, the CFO of UBS Group Inc., stated that lower rates would spur additional lending opportunities across the division, including in the US. He also noted that the company would continue to see sweeps balance taper, if not starting to grow, as rates come down.
- Analyst asked about the impact of Basel IV on the company's capital ratio.
- Todd Tuckner, the CFO of UBS Group Inc., stated that the impact of Basel IV on the company's capital ratio would be around 30 basis points, but that the company is still working on the details of the regulation and its implementation.
- Todd Tuckner, the CFO of UBS Group Inc., stated that the impact of Basel IV on the company's capital ratio would be around 30 basis points, but that the company is still working on the details of the regulation and its implementation.
- Analyst asked about the difference between the two and if it's due to the lower base creating a fully hedged revenue run rate or business mix.
- The company extended the duration of its equity and saw higher reinvestment income, which positively impacted GWM's NII, resulting in flattish results compared to the low to mid guidance. On the P&C side, the company saw positive effects of the balance sheet optimization work, which had a strong impact in Q3 and offset the rate impact. The company is always looking to drive offsets in the lower rate environment. In terms of the IB, the Credit Suisse team has been embedded for some time, and the positions have been transitioned over. Credit Suisse is supporting markets on the research side, and the performance is not about a lower base but rather a strong team that has gotten stronger and is performing well in supportive markets.
- The company extended the duration of its equity and saw higher reinvestment income, which positively impacted GWM's NII, resulting in flattish results compared to the low to mid guidance. On the P&C side, the company saw positive effects of the balance sheet optimization work, which had a strong impact in Q3 and offset the rate impact. The company is always looking to drive offsets in the lower rate environment. In terms of the IB, the Credit Suisse team has been embedded for some time, and the positions have been transitioned over. Credit Suisse is supporting markets on the research side, and the performance is not about a lower base but rather a strong team that has gotten stronger and is performing well in supportive markets.
