Not an enjoyable trend: of 30 big western banks, just four trade above their intrinsic value (they are all American banks: J.P. Morgan, Bank of America, Wells Fargo, and BNY Mellon). One interpretation is that investors currently favor sheer heft over a solid business model like UBS. The Swiss giant's capitalization puts it roughly in the median of the 30 lenders.
Vollert's also highlights that UBS appears fairly valued, when factoring its expected price-to-book value next year against its expected return on equity. This would make any major inroads in UBS' share price unlikely (see graph below).
(Graph: Helvetische Bank)
Waiting for Impetus
Investors are still waiting for the innovative idea that would kickstart UBS' fortunes (finews.com provided a few last week). A breach of the 10-franc mark by UBS' stock would have psychological and «optics» consequences that Ermotti can ill-afford.
The UBS CEO can expect more pressure on the shares in the short-term from sell orders near 10 francs. Further out, the stock represents a buying opportunity for investors of many stripes. The bank, which wants to buy back as much as $1 billion of its own stock this year, will think firstly of itself.
Barbarians at the Gate?
The low price will also attract activists, as Swiss investment outlet «Cash» (in German) reported. «Raiders» like Knight Vinke or Rudolf Bohli have already mounted attacks (largely in vain) one of the Swiss giants.
If the shares languish for long enough, activists could have time to marshal more disgruntled investors for their cause. The bottom line is that no one – the bank's investors nor its management under CEO Ermotti – want to see UBS' shares drop below 10 francs.
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