Monday, 27 July 2015

UBS - impressive wealth management growth but stretched valuation versus a year ago

A year ago I wrote a posting on UBS noting a 'reasonable timescale franchise buying opportunity' since when the shares have performed quite well (in CHF terms - even better in most other global currencies!):

Today's numbers are most noteworthy to me by the performance of core wealth management franchise where inflows were apparent in all regions and general margin progression was ok/solid.  

Elsewhere the corporate central cost reductions continued apace...

...and the reducing in size investment banking operations produced another quarter of solid returns and accounted for just over 28% of pre-central cost operating profitability:

Nevertheless (tangible) book value per share fell mostly influenced by the deeply technical 'Distribution of capital contribution reserve (within share premium)'

A year ago I mused about good upside potential from a CHF16+ share price and - via a couple of runs at CHF14 this proved up.  Using a similar sum-of-the-parts methodology however still struggles to justify much more than CHF18 a share.  Yes, the group is developing a higher value franchise focused on wealth management but value investors - unlike a year ago - have far less to chase here.  For me I am going to sell my holding, focus on alternative opportunities in the financial sector and await a CHF18s or below UBS share price.

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