Admittedly, shares in Swiss bank UBS, at SFr10.64 (696p), have fallen sharply since our buy tip. Its half-year performance certainly seemed lacklustre – pre-tax profit fell 42 per cent year-on-year to SFr2.26bn, largely reflecting weak trading income amidst grim financial markets conditions. But that’s not the way to judge this bank.
Credit quality, for instance, remains impressively healthy, with impaired loans representing just 0.6 per cent of the loan book. Even if that deteriorates, UBS’s hefty capital cushion leaves it amongst the best placed to cope – it has core tier-one capital equal to 17.2 per cent of its assets weighted for risk. Exposure to weaker eurozone countries remains modest, too, with just SFr5.7bn and SFr4.7bn at risk in Italy and Spain, respectively.
