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In the current year, UBS shares in particular have shown a downward direction. Since 22 January, when many Swiss stocks have peaked, the value of UBS shares has fallen by almost 30%. Recovery periods, if they existed, were short.
In the last four weeks the price has been even more under pressure than in the already gloomy months. UBS shares in liquidation markets in nervous markets. They lost about 13% to 13.80 Swiss francs since mid-September alone. UBS was worth 14 francs in November 2016.
Shares of UBS (in red) and Credit Suisse (in green) since the beginning of the year (chart: cash.ch).
The reasons for the recent fall in prices are partly due to external factors: political and economic conflicts such as the trade dispute between the United States and China, the coming and going of the Italian budget and the Brexit, as well as that the mixed economic forecasts of the world economy, constitute the most cyclical stocks of the Swiss market. Tickets added. The UBS stock has lost most of its value in the SMI after Adecco, Credit Suisse and Julius Baer since the beginning of the year.
Higher US bond rates and higher inflation expectations also contributed to market nervousness. Only: the rise in interest rates is considered good for banks as such, as shown by the quarterly figures of major US banks. They also came under pressure in the stock market, but JP, Citigroup and Bank of America's price declines declined by only about 7% and also showed a recovery trend. For Swiss banks, however, the rise in interest rates on UBS has not yet translated into higher share prices.
UBS plans "growth initiatives"
UBS will present its third quarter results on Thursday and will also update investors on the latest developments as of the same day. As part of this update for investors, it has already been indicated that the management of the big bank wanted to launch new growth initiatives. These are planned in markets around the world and will be presented in more detail Thursday, according to the expectations of badysts.
The experts are primarily interested in costs. The share of UBS would then be enhanced if Investor Day gave the impression that Wealth Management was moving towards more profitable periods. Asset management, of which UBS is the mainstay since the 2011 and 2012 strategy shifts, is still not profitable enough for many investors.
If UBS is able to implement its growth targets more profitably, operating debt will improve, according to a Vontobel Bank forecast. According to Vontobel's calculations, this "leverage effect", which compares the relationship between earnings growth and operating growth, has not improved much in the past two and a half years.
Business growth with wealthy customers is also an obstacle for UBS: too many banks want to have the same customers, which increases costs. The general manager, Sergio Ermotti, said in an interview last month that "there could be cooperation with other banks to reduce costs. He also pointed out that there were too many suppliers in the private banking market and that the market was fragmented. During consolidation, UBS intends to strengthen its position in the market as the world's largest badet manager.
Even with new business goals, the bank could theoretically try to encourage the purchase of shares. Ermotti, who has been with UBS for seven years, has already rejected the initiative in mid-September. In turn, a stock repurchase program that supports UBS stock price seems unlikely due to litigation. Just days ago, a lawsuit against UBS tax cheats was filed in France. This action could cost the bank billions in the event of conviction.
Good grades, but bad stock prices
Despite many projects, the image of the stock is relatively good. UBS generally receives positive ratings from badysts. But even though experts state lines of purchase recommendations: The course still uses little. Bank Vontobel, for example, continues to recommend UBS shares, but has recently lowered its price target from 21 to 19 francs. If UBS 's share actually gained as much in value, it would mean a price increase of about 30%. But we had to wait to be disappointed: not only UBS, but also the neighbors of Credit Suisse and Julius Baer, who are also struggling with problems of profitability.
A week after UBS, on November 1, Credit Suisse will follow the evolution of the third quarter. On the stock market, the price evolution of the second largest Swiss bank is approaching that of UBS. The price drop since mid-January is 28%, while the downward spiral of the last four weeks has cost just over 13% of the share price.
There are 183,737 millionaires in Singapore and 1,000 who are "crazy rich": Credit Suisse https://t.co/jFWl6kX2va pic.twitter.com/K899uDuXEj
– The Straits Times (@STcom) October 19, 2018
The price of the CS stock is about 13 francs compared to the level where it was transferred in June 2017. Within a few months, the price reached 18.80 Swiss francs and the markets were hoping to benefit from the restructuring of the bank, led by CEO Tidjane Thiam since mid-2015.
But Credit Suisse also faces a problem of profitability or cost. Like UBS, it needs a growth in retail banking. That will not change for the moment, if we compare it to the big investment bank CS of its counterpart UBS, well after next week will have gone well and the price is rising for a short time. Overall, Swiss banking stocks remain a difficult problem ahead of the third quarter of 2018.
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