UBS posts billions in profit and presses ahead with CS integration
Published: Wednesday, Aug 14th 2024, 07:10
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UBS once again generated a billion-euro profit in the second quarter of 2024 despite expenses for the integration of Credit Suisse. The big bank believes it is well on track with its integration efforts and the targeted cost savings.
Switzerland's largest bank generated a net profit of 1.14 billion dollars for the months of April to June 2024, as announced on Wednesday. However, it earned less than in the first quarter of 2024, when a profit of 1.76 billion dollars was reported.
However, a comparison with the same quarter of the previous year makes little sense: in the second quarter of 2023, the big bank reported a record quarterly profit of 29 billion dollars in connection with the takeover of Credit Suisse. Because the value of the CS assets acquired was significantly higher than the price agreed as part of the CS emergency takeover, UBS was able to recognize a high amount of so-called "negative goodwill".
Expectations exceeded
UBS's pre-tax profit in the second quarter of 2024 amounted to USD 1.47 billion and was therefore also below the figure for the first quarter (USD 2.38 billion). The big bank puts the underlying pre-tax profit, which excludes various one-off effects, primarily from the integration of Credit Suisse, at 2.06 billion for the second quarter.
UBS thus clearly exceeded analysts' expectations with regard to profit figures in the second quarter as well, having already surprised positively in the first quarter. According to the AWP consensus, experts had expected a profit of around 600 million for the second quarter.
New money inflows
The results reflect the progress made by UBS since the completion of the takeover of Credit Suisse, CEO Sergio Ermotti is quoted as saying in the press release. The big bank is well positioned to achieve its financial targets and return to the profitability it enjoyed before its "contribution to the stabilization of Credit Suisse".
In its core business, wealth management for wealthy private clients, UBS was able to attract a further 27 billion dollars in new assets. At the end of June, UBS managed assets totaling 5873 billion dollars across all areas, compared with 5848 billion dollars at the end of March.
Transfer of CS clients
The integration of Credit Suisse can now move forward following the merger of the Group companies UBS AG and Credit Suisse AG, which are located below the holding company, at the end of May. The transfer of clients to the UBS platforms in Luxembourg, Hong Kong and Singapore will begin in the fourth quarter, according to the press release.
UBS is making faster progress than planned with the targeted cost savings totaling USD 13 billion annually by the end of 2026. Further gross cost savings of 0.9 billion dollars were achieved in the second quarter. Overall, the annualized gross cost savings amount to around USD 6 billion and are expected to reach around USD 7 billion by the end of 2024. The combined cost base of UBS and CS at the end of 2022 serves as a comparison.
Slowing pace of savings
The big bank now expects the pace of cost savings to slow somewhat in the third quarter. In addition, further integration-related costs of around 1.1 billion dollars will be incurred, although these will be partially offset by increases in value in connection with the purchase price allocation. The NCL run-off unit is expected to incur a pre-tax loss of around 1 billion dollars in the second half of the year, the report continues.
With regard to the earnings outlook, UBS sees positive investor sentiment at the start of the third quarter as well as "sustained momentum" in client activity. However, there are headwinds in interest income, where the SNB's interest rate cut and a change in the investment mix in asset management are likely to have a negative impact.
The big bank is also making rapid progress with its share buyback program: since June, the bank has already purchased shares worth 467 million dollars.
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