UBS, in its first set of results since acquiring Credit Suisse, has announced that it will retain the domestic bank of its former rival. The decision comes as no surprise, as it was widely anticipated. Emphasizing that full integration is the best outcome for UBS, its stakeholders, and the Swiss economy, the bank is confident in its analysis.
In a remarkable achievement, UBS reported a net profit of $28.88 billion for the second quarter. This figure includes an impressive $29 billion in negative goodwill from the completed Credit Suisse acquisition in June. With an operating profit of $29.2 billion and revenues reaching $9.54 billion, UBS has surpassed expectations. Analysts had predicted an operating profit of $33.73 billion and a net profit of approximately $33.45 billion.
By incorporating Credit Suisse’s Swiss bank into its operations, UBS retains the crown jewel and consistent moneymaker of its struggling competitor. However, this decision may result in significant job losses. Credit Suisse’s second-quarter earnings report, released concurrently with UBS’s announcement, revealed adjusted income before taxes of CHF224 million.
UBS Announces Revised Cost Estimates and Positive Outlook
UBS has revised its estimates for cost savings as part of a recent deal, increasing the figure to $10 billion from the previously expected $8 billion. The bank is also aiming for a cost-to-income ratio of less than 70% and a return on common equity tier 1 capital of approximately 15% by the end of 2026.
In the second quarter, UBS reported a C/I ratio of 88.9% on an underlying basis, along with a RoCET1 of 4.5%. Although the bank is expected to break even in the third quarter in terms of underlying profit-before-tax, this is a decline from the $1.1 billion achieved in the second quarter.
Despite this, UBS has recently observed an improvement in client sentiment and an increase in transactions among its wealth management clients. The bank anticipates positive net new asset flows in both its wealth and asset management franchises, with higher asset valuations also expected to contribute positively to recurring net fee income year on year.
Moving forward, UBS has defined a non-core perimeter for its operations that includes elements of the Credit Suisse franchise not aligned with its strategy. This encompasses the majority of assets and liabilities of its investment bank, wealth management, and asset management divisions.
UBS and Credit Suisse will continue to operate separately until 2024, with the latter’s brand and operations remaining in place until 2025, according to UBS.
