UBS Group & Credit Suisse Reduce Share In Domestic Mortgage

UBS Group AG (NYSE:UBS) and Credit Suisse (SIX:CSGN) Group AG (NYSE:CS) recently made news for reducing their share in the domestic mortgage market. Their combined market share reduced 8 basis points year over year to 27.4% of the Swiss mortgage market worth $996 billion as of Apr 2017, per a Financial Times article.

The reason for the cut back is the prevailing low interest rate environment in the European economy. Also, increasing property rates along with intensified competition in the market led these banking giants to take this action.

Per the article, UBS Group disclosed that it followed a plan of growing its mortgage business qualitatively by granting loans on a substantial basis. Though this strategy led to an increase in mortgage volumes in absolute terms, UBS Group lost its share in relative terms. Thus, it is expected to revamp its profitability and quality of mortgage business.

Credit Suisse had been expanding its mortgage business on sustainable risk and returns basis. However, the bank noted that the conditions were more favorable to private real estate than commercial markets.

Moreover, Cantonal banks, Swiss government-owned commercial banks and Raiffeisen, the third-largest bank in Switzerland, have been increasing their share in mortgage business.

Cantonal banks have, in fact, outpaced Raiffeisen in the race to increasing mortgage volumes. Pressure on margins leaves Cantonal Banks with no other options than to increase their mortgage business share.

First-quarter 2017 results for both UBS Group and Credit Suisse improved on a sequential basis. We remain optimistic about their restructuring initiatives to reduce costs and aid revenues.

Shares of UBS Group and Credit Suisse have gained 40.3% and 41.4%, respectively over the last one year, outperforming the Zacks categorized Banks - Foreign industry’s rally of 33.4%.

Currently, UBS Group sports a Zacks Rank #1 (Strong Buy), whereas Credit Suisse carries a Zacks Rank #3 (Hold).

A couple of other stocks worth considering in the same space include ING Group, N.V. (NYSE:ING) and HSBC Holdings (LON:HSBA) PLC (NYSE:HSBC) . Both these stocks sport a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

ING Group’s current-year earnings estimates were revised 14.1% upward, over the last 60 days. Further, its shares have rallied 81.9%, in the last one year.

HSBC Holdings witnessed a nearly 1% upward revision in the Zacks Consensus Estimate for the current year, in the past 60 days. Also, its shares have jumped 61.1%, over the last one year.

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