UBS 2024 faces important milestones for CS integration
- 06 Feb 2024 1:50 pm CET
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The integration of Credit Suisse dragged UBS back into the red in the final quarter of 2023. However, Switzerland's largest bank posted a huge annual profit for the year as a whole thanks to the massive book gains from the CS takeover. In 2024, important milestones in the integration of the former competitor are now imminent.
However, the renewed loss of 279 million dollars in the fourth quarter of 2023 (Q3 -785 million) was not only due to the high expenses for the integration of the acquired Credit Suisse. The result was also negatively impacted by a value adjustment of around half a billion dollars on the big bank's stake in the Swiss stock exchange SIX, as can be seen in UBS's quarterly report published on Tuesday.
UBS can still report an absolute record profit of CHF 29.0 billion for the year as a whole. However, this figure is due to the high book profit in the billions from the CS takeover ordered by the Swiss authorities, as the valuation of the assets acquired from the competitor was significantly higher than the purchase price.
Costs reduced by 4 billion
The cost reductions resulting from the CS integration continued in the fourth quarter: as at the end of the financial year, UBS had already reduced costs by around USD 4 billion compared to the combined result of the two big banks in the 2022 financial year, the bank emphasized.
This is also reflected in the number of jobs: In the fourth quarter of 2023 alone, the number of jobs fell by a further 4300, bringing the total number of full-time positions to just under 113,000 at the end of December, plus around 25,000 external employees.
High cost targets
The bank now considers the first phase of the integration to be complete. "In the next phase of the integration, we will focus on restructuring and optimizing the acquired business," said UBS CEO Sergio Ermotti. However, he also emphasized: "Our path over the next three years will not always be straightforward, but the strategy is clear."
Last but not least, the bank wants to further reduce costs significantly. According to the new targets, annual costs should be 13 billion dollars below the 2022 level by the end of 2026. Previously, UBS had set its target for cost savings at more than 10 billion dollars by the end of 2026.
Probably the most important next milestone is the merger of the still separately managed legal entities UBS AG and Credit Suisse AG, which is scheduled to take place by the end of the second quarter of 2024. Not least, this also forms the basis for further extensive efficiency gains. "We are still operating two global systemically important banks," CEO Ermotti told the media.
For Switzerland, the merger of the UBS and CS national companies is now expected "probably before the end of the third quarter of 2024". This will also have a visible impact on the local branch network, as CEO Ermotti confirmed at a media conference: the future number of branches will probably be "closer to the number of UBS branches before the CS takeover".
However, UBS also wants to satisfy its shareholders. It is paying a dividend of USD 0.70 per share for the 2023 financial year and promises an increasing dividend payout over the coming years. It also intends to resume its share buybacks: In the current year, it is already expected to carry out buybacks of up to 1 billion dollars.
Investors were nevertheless cautious on Tuesday: UBS shares fell sharply on the Swiss market and were trading at CHF 24.85 (-3.3%) in the afternoon. Initial market reactions highlighted the planned distributions as positive. On the other hand, the result on the cost side was disappointing, even though the bank is making clear progress with its restructuring.