-- UBS Group (UBS) delivered Q1 that highlighted the "strength" of its core business model and improved confidence in future shareholder returns, though the quarter's trends may not be fully sustainable, RBC Capital Markets said in a report Thursday.
"Strong revenue growth," disciplined cost management and solid capital generation provided UBS with greater "flexibility" for future capital distributions and share buybacks, according to the report. Organic capital generation reached 30 basis points in the quarter, helping offset "regulatory headwinds" and supporting potential distributions in 2026, according to the report.
The firm also cited "small relief" from regulatory pressures after softer-than-expected "ordinance changes," which it estimates provide a $7 billion benefit versus prior estimates. However, proposed rules related to "foreign subsidiary capitalization" remain "as harsh as expected" and could still create capital inefficiencies, RBC said.
UBS' wealth management business showed strong momentum in the Americas and Asia-Pacific, supported by "client activity," deposit and loan growth, and improving profitability trends, the report said.
RBC has an outperform rating on UBS and raised its price target to 38 Swiss francs ($48.75) from 37 Swiss francs.
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