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Stock Strategist

Undervalued UBS Leads in Wealth Management

It was ahead of the curve in refocusing its business on its core competency.

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UBS (UBS) reported a net profit of $1.4 billion for the second quarter, roughly the same as the year-ago period. However, it comfortably beat consensus expectations, coming in about 30% higher than the $1 billion consensus had forecast. For the full year, we are 13% ahead of consensus, and this solid quarterly result gives us greater comfort with our estimates. We maintain our fair value estimate and narrow moat rating.

UBS currently trades at 0.95 times its tangible book value, its lowest level in six years. Given its superior profitability, we believe UBS is one of the few European banks that deserves to trade at a premium to its book value. UBS is also trading deep in 4-star territory, and we view the current share price as a good entry point. While UBS is not immune from revenue pressure caused by lower interest rates, we do believe its sensitivity is meaningfully lower than its European retail banking peers’.

Johann Scholtz does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

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