UBS Earnings: Beats Consensus Expectations, but Market Distracted by Capital Technicalities

Narrow-moat UBS reported underlying pretax profits of $2.4 billion for the third quarter of 2024, 41% ahead of the $1.7 billion company-compiled consensus estimate. Revenue came in 7% higher than expected and was the main driver of the earnings beat, with operating expenses in line with consensus. All divisions outperformed expectations. We were surprised by the market's sharply negative reaction. UBS' share price declined by 4.5% on Oct. 30, the weakest of the European banks we cover. We think the decline in UBS' common equity Tier 1 ratio concerned investors. However, we see it as merely a technical decline that will reverse in the coming years.