UBS Tumbles After Biggest Swiss Bank Misses Key Targets As Investors Pull Money

The rift between the US (where rates are still positive) and European banks (where rates have never been more negative) continues to grow.

While US banks have so far reported mostly better than expected results for Q4, the same can not be said for Europe, where UBS shares are down 5% as the bank misses fiscal year profitability and cost targets in addition to trimming its mid-term goals. As Saxobank notes, "UBS has been hit by wealth management outflows, negative rates and poor performance in its investment banking division" and notes that "this obviously sends a warning to investors if they thought overweight European banks was a good idea." To be sure, negative rates will continue to haunt European banks until the ECB changes its mind on negative rates.

It's not just NIRP though: the great conundrum of 2019 struck again, because even as stocks hit all-time highs, the largest Swiss bank missed key targets for 2019 as investors pulled money late in the year when stocks were soaring, underscoring the challenge for new wealth management co-head Iqbal Khan as he seeks to turn around its most important business.

As Bloomberg reports, the Swiss bank failed to meet several metrics set during a revamp of its goals just over a year ago, highlighting mounting headwinds for European lenders while U.S. rivals post record profits. The downgrades were across the board - on profit, cost efficiency and dividend growth - while the private bank unexpectedly saw $4.7 billion of outflows last quarter.

The lower targets, and higher outflows overshadowed a strong finish to the year in which the bank posted better than expected net income and investment banking results while boosting its core financial strength. UBS (UBS) also gave a moderately positive outlook for the first quarter, saying client activity is picking up and the favorable credit environment and partial resolution of trade disputes should help mitigate slowing global economic growth.

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