Asian Research Flash
18th September 2008
Downgrade UBS to HOLD
UBS confirms that its direct and counter-party exposures to Lehman Brothers are substantially closed out. UBS does not expect the total cost of closing out its exposures to Lehman Brothers to exceed USD 300 m. We have factored in USD 300 m losses in our valuation model related to exposures in Lehman Brothers, and expect UBS to incur additional write-downs in credit and real estate related assets in Q3 and Q4 2008.
We revised down our projection of UBS's commission income in FY 2008 and FY 2009 on net new money outflows and relatively low trading volume in capital market. The bank's trading income would also be affected by the mark-to-market write-downs on credit-related assets. It is fore-casted that UBS would incur trading loss of CHF 17.0 bn in FY 2008. We have revised down UBS's EPS estimate by 10.8% and 6.3% in FY 2008 and FY 2009, respectively.
Over the last few months, regulators have involved in discussion of potential regulatory changes in investment banking and wholesale banking industries. This would negatively impact UBS's investment banking operations. We believe the weak market sentiment would continue to weigh on UBS's share prices and have decided to downgrade the bank's rating to HOLD. We have also reduced UBS's target price to CHF 22.0 due to the reduction in earnings estimate.
Source: CS.
18th September 2008
Downgrade UBS to HOLD
UBS confirms that its direct and counter-party exposures to Lehman Brothers are substantially closed out. UBS does not expect the total cost of closing out its exposures to Lehman Brothers to exceed USD 300 m. We have factored in USD 300 m losses in our valuation model related to exposures in Lehman Brothers, and expect UBS to incur additional write-downs in credit and real estate related assets in Q3 and Q4 2008.
We revised down our projection of UBS's commission income in FY 2008 and FY 2009 on net new money outflows and relatively low trading volume in capital market. The bank's trading income would also be affected by the mark-to-market write-downs on credit-related assets. It is fore-casted that UBS would incur trading loss of CHF 17.0 bn in FY 2008. We have revised down UBS's EPS estimate by 10.8% and 6.3% in FY 2008 and FY 2009, respectively.
Over the last few months, regulators have involved in discussion of potential regulatory changes in investment banking and wholesale banking industries. This would negatively impact UBS's investment banking operations. We believe the weak market sentiment would continue to weigh on UBS's share prices and have decided to downgrade the bank's rating to HOLD. We have also reduced UBS's target price to CHF 22.0 due to the reduction in earnings estimate.
Source: CS.
