On Thursday, JPMorgan reiterated its confidence in UBS Group AG (NYSE:G:SW) (NYSE: UBS) shares, maintaining an “Overweight” rating and a price target of CHF 31.00.

The firm’s assessment follows a solid second-quarter performance by UBS, which led to a 21% upward revision to the bank’s adjusted earnings per share (EPS) estimates for 2024. The revision is mainly due to a lower tax rate and expectations of higher net credit loss (NCL) income.

UBS has made progress in integrating Credit Suisse, particularly in gross cost savings and reducing non-core risk-weighted assets (RWA).

The bank has also shown positive momentum in key metrics, such as Global Wealth Management’s (GWM) net new assets, which reached $54 billion in the first half of 2024, representing annual growth of nearly 3%.

The integration process resulted in a reduction in underlying quarterly costs (excluding litigation) to $9.1 billion in the second quarter, primarily due to a reduction in non-core costs.

JPMorgan expects the next phase of integration to deliver additional cost benefits, particularly for GWM and the Personal & Corporate Banking (PCB) businesses. The company maintains its cost forecast of $33.5 billion for 2027.

Looking ahead, JPMorgan forecasts UBS to deliver a return on common equity tier 1 (RoCET1) of 15.2% on an adjusted basis in 2027, exceeding UBS’s own target of 15% by the end of 2026. In terms of valuation, UBS currently trades at 1.3 times its current price to tangible book value (P/TBV). Based on 2027 estimates, shares trade at 8 times price-to-earnings (P/E) and 1.1 times P/TBV, representing a return on tangible equity (RoTE) of 14.8%.

JPMorgan’s analysis concludes that UBS remains a top pick within the firm’s European banking portfolio and that the company’s Overweight rating signals a positive outlook for the bank’s stock performance.

In other recent news, UBS Group AG reported net profit of $2.9 billion for the first half of 2024, representing notable progress following the acquisition of Credit Suisse. The company’s return on common equity tier 1 (CET1) capital was 9.2%, with a common equity tier 1 ratio of 14.9%.

UBS’s Global Wealth Management and Asset Management divisions reported pretax profits of $1.2 billion and $228 million, respectively, despite a decline in net new money in the latter division. The Investment Bank also delivered strong results, with operating profit of $412 million.

In light of these developments, UBS remains focused on its capital return plans, including dividends and buybacks. The company is also committed to successfully integrating Credit Suisse and expects to incur related costs of $2.3 billion in the second half of the year.

Despite some challenges, such as a decline in net interest income and net outflow of new loans, UBS remains confident in its ability to navigate market volatility and invest strategically to create long-term value.

Analysts from firms that review UBS’s performance have identified both positive and negative highlights. On the positive side, UBS has achieved significant cost savings and shown strong performance in its core businesses.

However, they also pointed to areas of concern, such as a decline in revenues in Personal & Corporate Banking and an expected pre-tax loss for NCL in the second half of the year. UBS will discuss third-quarter results and further updates on its progress at its next earnings call in October.

InvestingPro Insights

Given JPMorgan’s positive outlook on UBS Group AG, recent real-time data from InvestingPro provides additional context for investors considering the bank’s stock. UBS has a consistent dividend payout record, increasing its dividend for the past three years and maintaining payments for 13 consecutive years, demonstrating its commitment to shareholder returns. In addition, despite weak gross profit margins, UBS trades at a low earnings multiple, with a trailing twelve-month (as of Q1 2024) adjusted P/E of just 9.7, which could signal an attractive valuation for investors.

The bank’s strong revenue growth of nearly 29.47% over the last twelve months and a significant quarterly increase of 45.11% in the first quarter of 2024 underscore the financial institution’s robust performance. With a solid operating profit margin of 16.84% and a healthy return on assets of 2.15%, UBS’s operational efficiency is evident. In addition, the bank’s dividend yield is 1.87%, with a notable dividend growth of 131.0% over the last twelve months, underscoring its potential as an income-generating investment.

Investors seeking further analysis can find additional InvestingPro picks on UBS, including expectations for profitability this year and a strong return over the past five years. For those looking to dig deeper, InvestingPro offers even more insight, with 10 picks in total, at: https://www.investing.com/pro/UBS.

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