BofA upgrades UBS to Buy amid ‘powerful’, ‘impeccable’ industrial logic behind CS deal

By Senad Karaahmetovic

Bank of America analysts upgraded UBS (SIX:) shares to Buy from Neutral with the price target raised to CHF 23 (CHF 1 = $1.0776) from the prior CHF 21.

Contrary to several other analysts who downgraded UBS stock this morning, they see a “powerful” industrial logic behind UBS’ takeover of Credit Suisse (SIX:).

“The industrial logic is impeccable: CS was the closest competitor to UBS in wealth management and Switzerland; and both banks are heavy in Swiss central costs. Being next door to one another, cost synergies could be substantial: UBS targets US$8bn by 2027, or 19% of the combined 2022 cost base. This compares with US$9.6bn 2022 UBS pre-tax profits,” analysts said in a client note.

The CS deal will push UBS’ invested assets to $5T from the prior $4T with a market share of Swiss deposits rising to 30%.

“UBS will have a smaller relative Investment Bank balance sheet, 25% compared with 33% historically. The market has rewarded more-Swiss and Wealth, less-IB business mixes and we see the potential for a re-rating from current multiples,” analysts added.

UBS shares are down 7.2% in today’s trading session in Europe.