A general view of the UBS building in Manhattan on June 5, 2023 in New York City.
Eduardo Munoz Alvarez | View Press | Corbis News | Good pictures
UBS posted a second-quarter profit of $28.88 billion on its first-quarter revenue since its takeover of Credit Suisse, Switzerland’s biggest bank.
Analysts had forecast a net profit of $12.8 billion for the three months to the end of June, according to a Reuters poll.
UBS said the result primarily reflected $28.93 billion in negative goodwill from the Credit Suisse acquisition. Pretax profit, excluding negative goodwill, integration-related costs and acquisition costs, came in at $1.1 billion.
Negative goodwill refers to the fair value of assets acquired in a merger over and above the purchase price. UBS paid a discounted 3 billion Swiss francs ($3.4 billion) to acquire Credit Suisse in March.
“Two and a half months after the completion of the Credit Suisse acquisition, we have wasted no time in delivering value to all our shareholders from one of the largest and most complex banking mergers in history,” UBS CEO Sergio Ermotti said in a statement.
“We are regaining customer confidence, taking the necessary steps to reduce costs and create economies of scale that allow us to better focus our resources and target investments for future growth.”
Here are some other highlights:
- CET 1 capital ratio, a measure of bank liquidity, reached 14.4% against 14.2% in the second quarter of 2022.
- Return on equity (excluding negative goodwill, integration-related costs and acquisition costs) was 4.3%.
- The CET1 leverage ratio was 4.8% versus 4.4% a year ago.
Credit Suisse’s Swiss bank will be fully absorbed
Credit Suisse’s firm domestic banking unit will be fully integrated with UBS, the group announced on Thursday, with the merger of the law firms expected to close in 2024.
The fate of Credit Suisse’s flagship Swiss bank, the group’s main profit center and the only division that will still generate positive earnings in 2022, was the focal point of the takeover, with some analysts speculating that UBS could spin it around and float it. IPO.
Ermotti said the bank’s analysis determined it was “the best decision for UBS, our shareholders and the Swiss economy”. The merger could be highly controversial in Switzerland because of the potential for high job losses in the process.
Credit Suisse was taken over as part of an emergency rescue deal brokered by Swiss authorities over a weekend in March. Earlier this month, UBS announced it had ended a 9 billion Swiss franc ($10.24 billion) loss protection agreement and a 100 billion Swiss franc general liquidity backstop that were put in place by the Swiss government when it agreed to take over Credit Suisse in March. .
“Clients will continue to receive the premium level of service they have come to expect, benefiting from enhanced offerings, expertise and global access,” Ermotti said of the integration of Credit Suisse’s Swiss banking division.
“Our strong capital base will help us keep consolidated credit exposures unchanged while maintaining our risk controls.”
The bank also announced that it is targeting total cost savings of at least $10 billion by 2026, when it hopes to consolidate all of Credit Suisse Group’s businesses.
UBS delayed announcing its second-quarter results – initially scheduled for July 25 – until it completes the Credit Suisse acquisition on June 12.
In the previous quarter, UBS suffered a 52% annual drop in net profit due to legacy litigation related to US mortgage-backed securities.
UBS shares closed Wednesday trading up nearly 30% since the start of the year, according to Eikon.
A separate Thursday filingThe Credit Suisse subsidiary posted a net loss of 9.3 billion Swiss francs in the second quarter as it saw net asset outflows of 39.2 billion Swiss francs, with assets under management falling 3% amid a massive exodus of clients and employees.
Thursday’s report was Credit Suisse’s last as an independent entity, and showed that despite the recovery, the loss of customer confidence that fueled the bank’s collapse in March has yet to be reversed.
Nevertheless, UBS noted that this attrition rate is slowing, and the bank will be keen to retain as many Credit Suisse customers and clients as possible to make the massive merger work in the long run.