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Barclays analysts have questioned the ability of UBS to achieve satisfactory returns, suggesting market expectations of the Swiss investment bank are too high.

In a note published Monday, Barclays European banks analysts Amit Goel, Jun Yang and Krishnendra Dubey cut their price target for UBS by 6%, and suggested the bank may need a strategy overhaul to avoid weak profitability. However, they also noted that no imminent changes were expected.

Justifying their “underweight” position on UBS compared to the neutral industry view, the analysts said that while the market environment may be challenging, competitors focusing on niche products were “generating much higher RoEs (return on equity).”

“Many investors we speak to believe that UBS should also be able to achieve higher returns, and have been frustrated for some time in this regard.”

The note specifically referenced Swiss private bank Julius Baer, which most recently reported underlying pre-tax return on tangible investment (RoTE) of 33% for 2018. UBS is currently targeting RoTE of 12.5% in 2019, although sell-side analysts do not currently expect the group to achieve this.

Along with questions of organization, the note also questions whether more broadly, it would make sense to “break up” the UBS group, and whether the “costs of size are more than outweighing the benefits?”

The analysts acknowledged the common justifications offered for weak profitability, including the global nature of the business and structural costs of spanning different jurisdictions. The fact that the group’s U.S. business has a structurally low operating margin, but is “tax efficient,” was also cited along with the significant amount of capital tied up in the investment bank.

However, the note called into question whether the current business model could optimize returns, and whether the profitability potential of the group could in fact decline further from here.

Time to reshuffle resource?

The note suggested the profitability of UBS’ wealth business is being “diluted away” and called into question the bank’s heavy focus on its investment bank, along with its emphasis on ultra-high net worth (UHNW) clients.

“The vast majority of the Investment Banking (IB) operations are unnecessary for the UHNW client base, or UHNW clients are lower profitability than HNW clients,” the note stated.

UBS management reaffirmed its current strategy at the investor update in October 2018 and the note said that since that date, expectations for the bank had been “downgraded materially.”

A spokesman for UBS declined to comment when contacted by CNBC.

In 2017, UBS became the first international wealth manager to establish a presence in the Qianhai free trade zone, aimed at boosting financial cooperation between Shenzhen and Hong Kong.

Evelyn Cheng | CNBC

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US-UK trade deal within a year of Brexit will be tight, UK PM Johnson



It will be tight to meet the United States’ desire to do a post-Brexit trade deal with Britain within a year, British Prime Minister Boris Johnson said on Sunday.

Johnson, who took office last month, had his first bilateral meeting with U.S. President Donald Trump earlier on Sunday at the G7 meeting in France and the two discussed a range of issues including trade.

In interviews with British television media afterwards, Johnson said the United States wanted to do a deal within a year of Britain leaving the EU on Oct. 31.

“Years and years is an exaggeration, but to do it all within a year is going to be tight,” he told BBC TV.

Johnson also said the chances of Britain agreeing a Brexit deal with the EU were improving but it would be “touch and go”.

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At G-7, Trump says he is not happy about North Korea missile tests



SAINT-JEAN-DE-LUZ, France — President Donald Trump said Sunday he was not happy after North Korea launched short-range ballistic missiles over the weekend.

“I’m not happy about it but again he’s not in violation of any agreement,” Trump said when asked about the recent string of tests from the North’s Kim Jong Un.

“I discussed long-range ballistic and that he cannot do and he hasn’t been doing it and he hasn’t been doing nuclear testing. He has done short-range, much more standard missiles, a lot of people are testing those missiles, not just him. We are in the world of missiles folks, whether you like it or not,” Trump said.

Meanwhile, Japanese Prime Minister Shinzo Abe said North Korea’s test was in violation of UN Security Council resolutions.

On Saturday, North Korea fired what appeared to be two short-range ballistic missiles into the sea off its east coast, the South Korean military said, the latest in a series of launches in recent weeks amid stalled denuclearization talks.

North Korea, the only nation to have tested nuclear weapons this century, spent most of Trump’s first year in office perfecting its nuclear arsenal. The newest member of the world’s exclusive nuclear weapons club has stopped testing of its nukes for now as the U.S. and international community offer the possibility of relief from crippling economic sanctions.

Under the third-generation North Korean leader, the reclusive state has conducted its most powerful nuclear test, launched its first-ever intercontinental ballistic missile and threatened to send missiles into the waters near the U.S. territory of Guam.

Since 2011, Kim has fired more than 90 missiles and had four nuclear weapons tests, which is more than what his father, Kim Jong Il, and grandfather, Kim Il Sung, launched over a period of 27 years.

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Trump at G7 hints at ‘very big trade deal’ with Britain post Brexit



U.S. President Donald Trump and Britain’s Prime Minister Boris Johnson arrive for a bilateral meeting during the G7 summit on August 25, 2019 in Biarritz, France.

Pool | Getty Images News | Getty Images

SAINT-JEAN-DE-LUZ, France — President Donald Trump met Britain’s Prime Minister Boris Johnson kicking off Group of 7 meetings in the French seaside town of Biarritz.

Clouding the G-7 gathering, which represents the world’s major industrial economies, is the U.K.’s uncertain removal from the European Union.

“He needs no advice, he’s the right man for the job,” Trump said when asked if he had any guidance for Johnson on how to deliver Brexit. “This is a different person and this is a person that is going to be a great prime minister in my opinion,” Trump added of the new prime minister.

In less than three months, Johnson will be at the helm of overseeing U.K.’s removal from the European Union, a move considered to be one of the most significant political and economic changes for the kingdom. And yet, it is still unclear, how, when or if Britain will still leave the European Union. The uncertainty around Brexit has rocked global markets and spooked allies.

Trump said that he would have a major trade deal with U.K. upon leaving the European Union.

“We’re are having very good trade talks between the U.K. and ourselves. We’re going to do a very big trade deal, bigger than we’ve ever had with the UK,” Trump said. “At some point, they won’t have the obstacle of, they won’t have the anchor around their ankle, because that’s what they had. So, we’re going to have some very good trade talks and big numbers,” he said without adding any more detail on a potential deal.

U.S. President Donald Trump and Britain’s Prime Minister Boris Johnson attend a bilateral meeting during the G7 summit on August 25, 2019 in Biarritz, France.

Pool | Getty Images News | Getty Images

Johnson said he was similarly looking forward to future trade deals with the United States and praised Trump’s work on the American economy.

“We’ll be having some pretty comprehensive talks about how to take forward the relationship in all sorts of ways, particularly on trade and we are very excited about that,” Johnson said. “And I just want to actually congratulate the president on everything that the American economy is achieving, it’s fantastic to see that,” he added.

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