UBS Q1 Beats Estimates but Warns of Tariff-Driven Uncertainty

Strong Trading Quarter and Mixed Outlook

UBS reported a first-quarter net profit of $1.7 billion, topping analyst expectations of $1.3 billion despite a slight year-on-year decline from $1.8 billion. The Swiss lender’s Global Markets unit delivered a standout performance, with revenues up 32%, driven by elevated client activity in both equities and foreign exchange. Shares rallied over 2% on the results.

Tariff Risks Cloud Growth and NII Outlook

Despite the beat, UBS sounded a cautionary note: President Trump’s sweeping tariffs on trade pose a “material risk to global growth and inflation,” complicating the path for interest rates. The bank expects net interest income in its Global Wealth Management and Swiss segments to decline by a low-single-digit percentage in Q2 2025, reflecting continued pressure on lending spreads.

Deal Flow at Risk in Volatile Markets

UBS also highlighted that ongoing market turbulence could delay M&A and capital-markets transactions, as corporates hold off on deals. Management commented that with “a wide range of possible outcomes, the economic path forward is particularly unpredictable.”

Valuation Perspective: Banking Sector Undervalued

Even after today’s rise, UBS trades at a valuation discount to its peers. According to the Sector P/E Ratio API, European banks are changing hands at roughly 8× forward earnings, versus a 10× average for global financials—suggesting potential upside if tariff risks ease and deal activity resumes.