UBS posts high loss in third quarter
Published: Tuesday, Nov 7th 2023, 09:00
Updated At: Wednesday, Nov 8th 2023, 00:53
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UBS suffered a large loss in the third quarter of 2023. Adjusted for integration costs, however, it can report a significant pre-tax profit. The Group is also making progress with the integration of Credit Suisse.
The new UBS Group posted a net loss of 785 million US dollars in the third quarter, as announced on Tuesday. The quarter is the first in which CS is fully included. In the second quarter of 2023, the CS figures were only included in the UBS financial statements for the month of June.
UBS reported a pre-tax loss of 255 million for the third quarter. Adjusted - without the costs of the CS integration and other special factors - the pre-tax result was plus 844 million. This even includes new value adjustments for credit risks of 306 million dollars.
UBS has thus exceeded its own targets: At the end of August, the big bank had still only forecast a break-even adjusted pre-tax result for the third quarter and only a profit for the entire second half of the year. In the previous quarter, pre-tax profit adjusted for takeover effects at Group level amounted to 1.1 billion dollars.
Processing impacts on costs
The Global Wealth Management, Asset Management and Swiss business (Personal & Corporate Banking) divisions reported an increase in pre-tax profit compared to the previous quarter. However, Investment Banking, where Credit Suisse has recently been regularly in the red, posted a pre-tax loss.
In Investment Banking, UBS reported lower income in the trading business (Global Markets), which was only partially offset by higher income in Global Banking (the advisory business for capital market transactions). Costs in the division rose massively, mainly due to integration-related expenses, the consolidation of the costs of the former CS and higher expenses for technology.
UBS has made further progress in winding up the areas it intends to divest. A large part of the former CS Investment Bank is to be wound down. Risk-weighted assets in the run-off unit ("Non-Core and Legacy" NCL) fell by 6 billion dollars to 47 billion in the third quarter. Some positions were liquidated early at favorable conditions, UBS assured.
Moving forward with integration
UBS reported integration costs of 2.1 billion dollars for the third quarter. However, according to management, around half of this is attributable to personnel. This included the continued employment of staff in order to maintain the stability of the business.
The combined company's headcount fell by over 4,000 people in the quarter under review. Compared to the combined headcount of the two then still separate UBS and CS at the end of 2022, the headcount had fallen by a total of more than 13,000 people. The two banks together had around 120,000 employees at the end of 2022. The declines also include external employees.
By the end of the third quarter of 2023, UBS had thus achieved annual gross savings of around 3 billion dollars. This means that the target set for the end of the year has been achieved one quarter earlier than originally announced, according to the bank. By the end of 2026, UBS aims to achieve gross savings of more than 10 billion compared to 2022.
Inflows at CS
The situation at Credit Suisse has stabilized further, according to a statement. For the first time since the first quarter of 2022, new money inflows were generated again in a quarter in CS's wealth management business, according to UBS. The bank spoke of its efforts to recover assets from CS clients.
Overall, the UBS Group acquired net new money of 22 billion dollars in its core business, global wealth management, in the third quarter.
At the end of September, UBS managed assets totaling 5373 billion dollars at overall bank level. At the end of June, the figure was 5530 billion.
Uncertain economic situation
In the press release, UBS CEO Sergio Ermotti expressed his satisfaction that the bank had achieved a positive result on an adjusted basis in the first full quarter since the takeover of CS. "We look to the future with confidence as we build an even stronger and more secure UBS that all our key stakeholders can be proud of."
Meanwhile, UBS is cautious with regard to the market environment. The outlook for economic growth, investment valuations and market volatility remains difficult to assess, it says. The ongoing geopolitical tensions, in particular the conflicts in the Middle East and Ukraine, are adding to the uncertainty surrounding the economic outlook.
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