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UBS is slated to release its Q4 and full-year 2019 results on January 21, 2020. For FY 2019, Trefis estimates that the company will report:Revenues would decrease by 4.5% to $28.9 billion primarily due to negative growth in trading revenues and investment banking business, resulting in lower net interest and trading income. Further, it is slightly lower than the consensus estimate of $29 billion.EPS figure would reduce to $1.25 primarily due to a decrease in revenues, partially offset by a steady decline in expenses. However, net income margin is likely to expand by 40 basis points due to a faster decline in expenses. Additionally, our EPS estimate is higher than the consensus EPS estimate of $1.20.
We believe that stronger-than-expected earnings will overshadow negative revenue growth for FY 2019 and will likely result in UBS's stock price increasing once earnings are announced. In fact, our forecast indicates that UBS's valuation is $16 a share, which is roughly 20% ahead of its current price of $13.
(1) Revenues expected to be marginally below consensus estimates
Trefis estimates UBS's 2019 revenues to be $28.9 billion, marginally below the consensus estimate of $29 billion
Total net revenue
(1) Fees & Commission $17.2 Bil (59%)
(2) Trading Income $5.7 Bil (20%)
(3) Net Interest Income $5.5 Bil (19%)
(4) Other Income $0.5 Bil (2%)
TOTAL $28.9 Bil
Consensus $29.0 Bil
Surprise -($0.10) Bil
(2) EPS likely to beat consensus estimates
UBS's 2019 earnings per share (EPS) expected to be $1.25 per Trefis analysis, 4% higher than the consensus estimate of $1.20 per share
EPS - 2019E
Total Revenues $29.0 Bil
- Total Expenses $24.2 Bil(*)
Net Income $4.7 Bil (**)
÷ Shares Outstanding 3.8 Bil
(*) - The expense figure includes preferred dividend and other minority expenses
(**) - Numbers don't add up due to rounding
(3) Stock price estimate ~20% higher than market price
Trefis forecast for UBS's 2019 earnings and P/E multiple are ahead of the market expectations, working out to a fair value of $16 for UBS's stock, which is roughly 20% higher than the current market price of around $13.
UBS's Share Price [= A x B]
EPS - 2019E [ A ]
Trailing P/E Multiple [B]
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Detail about our forecast for UBS's (1) Revenues, (2) EPS, and (3) P/E Multiple follow:
Trefis estimates UBS’s 2019 revenues to be $28.9 billion, slightly below the consensus estimate of $29 billion.UBS’s total revenue has seen sizable headwinds since 2015 and has shrunk from $31.8 billion to around $30.3 billion in 2018. We expect this trend would have continued in 2019 as the uncertain environment, as well as low consumer sentiment, would have weighed on the bank’s revenue.The bank is likely to witness a drop in revenues across all operating heads, with Equity trading revenues likely to be the worst-performing segment. Moreover, advisory and underwriting revenues are also likely to tumble due to a global decline in the debt and equity underwriting deal volumes.Notably, wealth management which is the company’s largest growth driver is also likely to see a drop in revenues. Global headwinds are expected to have weighed on the segment's revenues for 2019, with revenues declining 4.8% y-o-y to $16.1 billion.Nevertheless, the division is likely to continue to grow its client assets, with the expected drop in revenues likely to be driven by lower average fees.For FY 2020, we expect UBS’s revenue to achieve steady growth and add close to $700 million in incremental revenues likely to be driven by its retail banking and wealth management divisions.
Our interactive dashboard analysis, How Important Is Wealth Management To UBS’s Business?, provides an in-depth view of the largest division of the bank.
For 2020, we believe that a steady growth in revenues and a slower growth in expenses will result in the adjusted net income margin figure slightly increasing to 17.1%
(3) A trailing P/E multiple of 12.6x looks appropriate for UBS's stock, which is higher than the current implied P/E multiple of 10.9x
We use our full cash flow model for UBS to arrive at a P/E multiple of 12.6x for a price estimate of $16
Note: P/E Multiples are based on Share Price at the end of the year, and reported (or expected) Adjusted Earnings for the full year
UBS P/E Multiple
CS P/E Multiple
HSBC P/E Multiple
BCS P/E Multiple
1. How to save your forecasts for UBS:
Click on the blue "Try Trefis" button in the header to create an account, then navigate back to this dashboard. Now, any changes you make to these inputs will be auto-saved as a scenario (see left panel of dashboard).
2. How to monitor your scenario vs. actual results
Once you've saved your forecast, you can "rename" your scenario by clicking on the gear icon next to the scenario (on the left panel). For more info, see this quick, 30-sec video (look at the 9 sec mark)
With your forecast saved and named, you can compare your forecasts to hundreds of other Trefis users who came up with their own forecasts. Lastly, you can share with friends and colleagues to show them how you fared and compare your forecasts to theirs.