UBS Group AG (UBS) shares fell nearly 5% during Tuesday's session after worse-than-expected fourth quarter earnings. The bank reported fourth quarter adjusted profit before tax of $1.21 billion, excluding $146 million in restructuring, $110 million in goodwill impairment, and a $29 million loss on properties held for sale. Net profit came in at $722 million, with diluted earnings per share of 19 cents.
SocGen reduced its price target on UBS to 9.60 Swiss francs (CHF) – implying 25% downside risk from yesterday's close – saying that the 13% increase in adjusted operating profit is the result of cost cutting rather than revenue growth. Analyst Andrew Lim also cited reported weak global wealth management performance, with a 6% miss, another $5 billion in net new money outflows, and lackluster 2020 to 2022 guidance as catalysts for the downgrade.
The company increased its dividend to $0.73 per share, which represents a 9.2% increase over the prior year. In addition, the company plans to repurchase around $450 million worth of shares to complete its current CHF 2 billion repurchase program. Any further buybacks will be assessed during the second half of the year and may vary depending on business conditions and any other developments.
From a technical standpoint, UBS stock broke down from trendline support to test the 50-day moving average near $12.51 during Tuesday's session. The relative strength index (RSI) fell to neutral levels with a reading of 44.27, but the moving average convergence divergence (MACD) experienced a bearish crossover that could signal more downside ahead. These indicators paint a bearish picture moving forward.
Traders should watch for a breakdown from the 50-day moving average toward the 200-day moving average and reaction lows of around $11.80 over the coming sessions. If the stock manages to rebound back above trendline resistance, traders could see a move to retest prior highs of around $13.22, although that scenario appears less likely to occur given the bearish sentiment surrounding the stock following its earnings.
The author holds no position in the stock(s) mentioned except through passively managed index funds.