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UBS Group AG UBS and Banco Do Brasil SA formally announced that they have reached an understanding and are on track to sign a strategic agreement to form an investment banking joint venture.
The venture — which will have a global presence — would provide investment banking and institutional securities brokerage services in Brazil, and select countries in South America such as Argentina, Chile, Paraguay, Peru and Uruguay.
Though the terms and conditions of the partnership agreement are still under negotiation, UBS is likely to have a controlling stake with 50.01% ownership in order to avoid operational hurdles that generally arise in state-controlled companies, but governance might be shared.
Both the companies plan to make this partnership successful by utilizing their complementary strengths. The venture will have access to Banco do Brasil’s corporate clients, and UBS’ global execution and distribution capabilities.
In June 2019, UBS entered into a joint venture with Japan’s largest trust banking group, Sumitomo Mitsui Trust Holdings (“SMTH”), with a view of strengthening its position in Japan. Notably, through this venture, UBS will have access to SMTH’s pool of high net worth and ultra-high net worth clients in the country.
UBS’ strategic alliance to improve customer base and efforts to tap into opportunistic growth areas bode well. Also, the company is taking initiatives to control costs, which will aid bottom-line growth.
However, its net interest income remains under pressure due to persistent negative interest rates in the domestic economy. Also, the company’s involvement in several lawsuits and regulatory probes is likely to keep legal costs elevated.
Coming to price performance, the stock has lost 2% over the past three months compared with 3.8% decline of the industry it belongs to.
Currently, UBS carries a Zacks Rank #4 (Sell).
Some better-ranked stocks in the finance space are Royal Bank of Canada RY, Mackinac Financial Corporation MFNC and Salisbury Bancorp, Inc. SAL. All these stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Royal Bank of Canada for the current year has been slightly revised upward in the past 60 days. The company’s share price has gained 18.2% so far this year.
Mackinac Financial’s earnings estimates for 2019 have been raised 4.1% upward in the past 30 days. Its share price has risen 14.5% year to date.
Salisbury Bancorp’s shares have gained 9.8% year to date. Its earnings estimates for 2019 have moved up 1.5% in the past 60 days.
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