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On Tuesday, Deutsche Bank (ETR:DBKGn) analyst Benjamin Goy upgraded UBS AG (UBSG:SW) (NYSE: UBS) stock rating from Hold to Buy and increased the price target from CHF29.00 to CHF37.00. Goy noted that UBS’s share price underperformed European banks by 10 percentage points following a 7% drop on the day of the fourth-quarter 2024 results, which was attributed to the emergence of the double leverage issue and unfavorable investor positioning. Currently trading at $33.61, UBS has demonstrated strong momentum with a 10.85% return year-to-date. According to InvestingPro analysis, the stock appears fairly valued, with additional insights available in the comprehensive Pro Research Report.
UBS addressed the double leverage concern by reducing it at the group level in the fourth quarter of 2024, which Goy highlighted as a strategic move to provide future flexibility and avoid pre-empting a decision by Swiss authorities. This decision was made in lieu of fixing a potential bottleneck in its parent bank. With a market capitalization of $106.84 billion, UBS remains a prominent player in the Capital Markets industry, as noted in InvestingPro analysis.
The analyst also pointed out that UBS has been successfully reducing costs and is well-positioned in its business sectors for 2025 and beyond. Furthermore, UBS has been increasing capital returns significantly, less than two years after acquiring Credit Suisse. Following the fourth-quarter results, Deutsche Bank has raised its earnings projections for UBS by 3% to 12%. The bank’s strong performance is reflected in its impressive 21.32% revenue growth and maintaining dividend payments for 14 consecutive years, as highlighted by InvestingPro.
Goy’s analysis suggests that UBS is trading at 10.3 times its estimated 2026 earnings per share (EPS), which aligns with its 10-year average but is roughly 40% below its peers. By 2027, the bank’s valuation is expected to decrease to 8.1 times EPS, with a strong mid-teens return on tangible equity (ROTE) anticipated post-integration. The combination of reduced leverage, increased earnings, and a lower valuation formed the basis for the upgrade to a Buy rating. Currently trading at an attractive P/E ratio of 3.71x, UBS shows strong financial health metrics according to InvestingPro’s comprehensive analysis.
In other recent news, UBS Group AG (NYSE:UBS) is making headlines with its ongoing workforce reduction following the acquisition of Credit Suisse. CEO Sergio Ermotti stated that the bank plans to cut an additional $5.5 billion in costs, which will inevitably lead to redundancies. The bank’s workforce, which expanded to approximately 120,000 after the acquisition, has since decreased by about 10,000. UBS also plans to save by discontinuing the use of Credit Suisse’s old IT systems.
Kepler Cheuvreux analysts recently upgraded UBS’ stock rating from Hold to Buy and increased the price target to CHF 33.00. Analyst Nicolas Payen highlighted the review of the Swiss Too Big To Fail framework and the performance of UBS’s Americas wealth management operations as influential factors. Despite potential capital shortfall, Payen believes UBS’s ability to return capital to shareholders won’t be impeded, with plans for $15 billion in buybacks between 2025 and 2027.
Morgan Stanley (NYSE:MS) also expressed a positive outlook on UBS, citing strong earnings and effective integration strategies. The firm increased the bank’s price target from CHF31.00 to CHF34.00 while retaining an Overweight rating on the shares. These recent developments reflect the financial community’s confidence in UBS’s ability to navigate through challenges and capitalize on opportunities.
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