UBS reported a profit of nearly $29 billion during the second quarter of last year due to a huge one-time gain reflecting how acquisition costs were far below the value of Credit Suisse | Photo: Bloomberg
UBS on Wednesday reported net profit of $1.14 billion for the April-June period, comfortably beating analysts’ forecasts as Switzerland’s largest bank enters a new phase in its integration of former rival Credit Suisse.
Net profit attributable to shareholders compared with the $528 million expected by analysts in a survey provided by the company for the bank’s first results since UBS completed its formal legal merger with Credit Suisse in May.
UBS acquired its former rival last year in a bailout organised by Swiss authorities when Credit Suisse collapsed following a series of financial setbacks and scandals.
In a statement, UBS Chief Executive Sergio Ermotti said the first-half results reflected the “significant progress” the bank had made since closing its acquisition of Credit Suisse.
“We are well positioned to meet our financial targets and return to the levels of profitability we achieved before we were asked to intervene and stabilise Credit Suisse,” he added.
“We are now entering the next phase of our integration, which will be critical to achieving further substantial benefits in terms of costs, capital, financing and taxes.”
UBS also said it had achieved $0.9 billion of additional gross cost savings, reaching around 45 percent of its cumulative annualized gross cost savings ambitions.
The bank has reduced legacy and non-core risk-weighted assets by 42 percent since the second quarter of last year, including a decrease of $8 billion compared to the previous quarter, it added.
UBS said the macroeconomic outlook was clouded by ongoing conflicts, geopolitical tensions and the looming financial crisis in the United States.
elections. These uncertainties are expected to persist for the foreseeable future and are likely to lead to greater market volatility than in the first half of the year.
The bank said it was seeing positive investor sentiment and continued momentum in customer and transaction activity.
Moderate headwinds were also observed in net interest income due to changes in the current mix in Global Wealth Management and the effects of the second rate cut by the Swiss National Bank, not yet reflected in UBS deposit prices in Personal and Corporate Banking.
The bank said it expected to incur about $1.1 billion in integration-related expenses in the third quarter and that the pace of gross cost savings would slow modestly on a sequential basis.
Integration-related expenses should be partly offset by an accrual of about $0.6 billion of purchase accounting effects, it said.
UBS reported a profit of nearly $29 billion during the second quarter of last year due to a huge one-time gain that reflected how acquisition costs were far below Credit Suisse’s value.
Swiss authorities oversaw the first merger of two global systemically important banks (as designated by the Financial Stability Board) in the first half of last year.
After that, UBS posted two consecutive quarters of losses due to the cost of acquiring its rival.
Investors were enthusiastic about the acquisition, and this summer UBS’s share price has risen by more than two-thirds since it bought Credit Suisse in March 2023. However, UBS shares have since lost ground during recent turmoil in global markets.
Analysts are closely watching UBS’s takeover of Credit Suisse, with Ermotti saying in May that any delay in the two banks’ technological integration could erode planned cost savings.
Markets are also watching as Swiss authorities push ahead with plans to tighten banking regulation as they seek to ensure there is no repeat of the Credit Suisse crisis.
In April, the Swiss government presented a series of so-called “too big to fail” proposals outlining how UBS should hold extra capital to protect itself against future setbacks.
Although the Swiss finance minister has suggested the sum could be between $15 billion and $25 billion, it remains unclear exactly how much it will be, and UBS has expressed “serious” concerns about the increased capital requirements.
(Only the headline and image of this report may have been reworked by Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)
First published: August 14, 2024 | 10:52 am IS
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