Switzerland’s investment banking stalwart UBS (NYSE:UBS) is seeing shares pop sharply higher on Wednesday. Undergirding sentiment is strong results stemming from the company’s second-quarter earnings report. Helping matters is also the successful consolidation of Credit Suisse, which collapsed last year due to a raft of scandals and compliance failures. Subsequently, the lift in UBS stock is demonstrating that the underlying enterprise is moving forward.
According to a CNBC report, UBS blew past expectations for net profit, delivering $1.13 billion. This figure represented a substantial gap from a company-compiled consensus estimate of $528 million. One point to keep in mind, however, was that the profit was lower than the $1.75 billion posted in Q1.
On the top line, UBS generated sales of $11.904 billion. In contrast, the consensus view among polled analysts targeted revenue of $11.52 billion. As CNBC reports:
“UBS said strong capital markets activity had partially offset a drag from net interest income, which it had previously flagged would be weaker due to lower lending and deposit volumes and lower Swiss interest rates.”
Still, one of the mainline catalysts of UBS stock was the 15% increase in the bank’s global wealth management unit to $6.05 billion. Further, sales of the investment bank unit jumped 38% to $2.8 billion. Management highlighted the consolidation of Credit Suisse as a key contributor.
UBS Stock Rises From Banking Crisis Drama
For UBS stock, the strong earnings report likely only represented a component of today’s strong rise. That’s not to dismiss the results, which were impressive. However, the banking world was in a much different place in 2023, especially when it came to troubled Credit Suisse.
As CNN mentions, the bank’s customers withdrew the equivalent of about $121 billion in the final calendar quarter of 2022. At the time, social media speculation ran wild that Credit Suisse was on the brink of collapse. Moreover, the U.S. regional banking crisis sparked a fresh wave of outflows.
Last month, UBS also disclosed that it completed its merger with Credit Suisse, putting an end to the headline drama. Further, the Q2 earnings report highlighted that much good can still come from an ignominious situation, thus lifting UBS stock.
Moving forward, UBS is now looking to extend the positive momentum. “We are now entering the next phase of our integration, which will be critical to realize further substantial cost, capital, funding and tax benefits,” said CEO Sergio Ermotti, per MarketWatch.
According to TipRanks, the consensus view for UBS stock comes in as a moderate buy. The average price target is $31.76 per share, which given today’s pop only represents 3% upside. However, Goldman Sachs reiterated its bullish stance with a $40.89 price target, implying about 32% upside.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.