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UBS Q1 profits fell 64 percent with weak numbers in all segments: wealth management - 40%, investment bank - 67% and corporate finance - 39%. The only bright spot is an increase in net new money which follows 2 consecutive quarters of outflows.
The reason for the miss is mainly attributed to the general risk aversion which negatively impacted trading volumes. While this is a phenomenon that is not unique to UBS, other banks that reported such as Citigroup, Bank of America or JP Morgan have experienced a much lower impact from market volatility. Ermotti’s wording on the outlook also sounded a lot more alarming compared to his peers. This gives the impression that UBS’s business model is more vulnerable to market volatility.
This does not bode well for a company whose ROE is expected to be higher than its peers. Additionally market volatility fell to extreme low levels again since early March, marking the longest streak of low volatile markets since august 2015. We would expect a pick up in the volatility towards the second half of the year.
The momentum on UBS’s share price remains on the downside with the 17 Sfr. zone acting as major resistance (200 day EMA and downtrendline). We would expect the share price to move towards the bottom of its consolidation flag at around 14.5 – 15, and below in case of a break.