Cautious Outlook on UBS Group AG: Sell Rating Amid Capital Concerns and EPS Adjustments

UBS Group AG (UBS – Research Report), the Financial sector company, was revisited by a Wall Street analyst today. Analyst Giulia Miotto from Morgan Stanley downgraded the rating on the stock to a Sell and gave it a CHF26.00 price target.

Giulia Miotto’s rating is based on several factors, primarily revolving around the capital proposal and its implications for UBS Group AG. The analyst has adjusted the buyback assumption to $3 billion from 2026 onwards, which reflects a more conservative approach given the recent guidance from a sell-side conference. This adjustment has led to a decrease in the expected earnings per share (EPS) for the years 2025-2028 by an average of 5%. Additionally, the valuation of UBS now considers excess capital above a minimum of 16.50%, compared to the previous 16%, indicating a more cautious outlook on capital requirements.
Another significant factor influencing the Sell rating is the uncertainty surrounding mitigating actions that UBS might undertake. While there are potential strategies to alleviate the initial capital impact, such as increasing double leverage and upstreaming more excess capital from foreign subsidiaries, these measures are expected to take time. During this period, UBS’s global competitors may face less stringent stress tests, which could put UBS at a relative disadvantage. Furthermore, despite the underperformance of UBS shares year-to-date, driven by capital concerns and weaker earnings trends compared to European banks, the uncertainty and capital headwinds are anticipated to continue affecting the share price negatively.

In another report released on June 4, Bank of America Securities also reiterated a Sell rating on the stock with a CHF25.00 price target.

Based on the recent corporate insider activity of 11 insiders, corporate insider sentiment is negative on the stock. This means that over the past quarter there has been an increase of insiders selling their shares of UBS in relation to earlier this year.