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UBS Group (UBS) CEO Warns Investors of Lower Revenues in Q1

Zacks Equity Research

UBS Group AG’s UBS CEO, Sergio Ermotti seems to have warned investors about first-quarter 2019 results much before the actual release. At a conference in London, Ermotti informed that the company is witnessing its worst quarter in years.

He stated, “Volatility and volumes are muted with limited activity from institutional and global wealth management clients.” Thus, the bank’s wealth management and investment banking division’s revenues have been experiencing a decline so far this year.

Investment banking revenues in the first quarter of 2019 are down nearly one-third compared with the prior-year quarter.

Ermotti added, “We've seen some improvement lately but it remains patchy, and not enough to offset the challenging start to the year."

Hence, the outlook for the investment banking division was lowered. Now, first-quarter pre-tax return on attributed equity for the investment banking division is expected to be in the mid-single-digit range, down from 15% targeted earlier for the 2019-2021 period.

In order to offset the impact of the current market scenario to some extent, the bank has stated that it is making an effort to save an additional $300 million in 2019 by slowing down the hiring of employees and holding back some of its IT projects. Results of these efforts are expected to be seen mostly in the second half of the year.

Maintaining cost discipline is significant for the long-term success of UBS Group. The company has been trying to improve cost efficiency, and strengthen cost management and transparency. We believe that gradual cost reductions will aid its bottom-line growth to quite an extent.

Shares of UBS Group have lost 29% over the past 12 months compared with 9.3% decline of the industry.



The company currently carries a Zacks Rank #4 (Sell).

A few better-ranked stocks from the finance space are Fifth Third Bancorp FITB, M&T Bank Corporation MTB and Credit Acceptance Corporation CACC.

Over the past 60 days, Fifth Third Bancorp has witnessed an upward earnings estimate revision of 1.5% for the current year. Its shares have gained 14% in the past three months. The stock currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Currently, M&T Bank also has a Zacks Rank of 2. Its earnings estimates for 2019 have been revised 1% upward over the past 60 days. Shares of the company have gained 18.1% in the past three months.

Credit Acceptance’s share price has increased nearly 25.7% in the past three months. For 2019, its earnings estimates have been revised 10.2% upward over the past 60 days. The stock currently sports a Zacks Rank #1.

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