UBS surprises again with billion-euro quarterly profit
Published: Wednesday, Oct 30th 2024, 15:40
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UBS once again exceeded market expectations on Wednesday with a billion-euro profit. In the third quarter of 2024, the big bank also made further progress with the integration of Credit Suisse. After the share initially reached a new multi-year high in the morning, however, there was profit-taking.
UBS generated a profit of 1.43 billion US dollars in the months from July to September, while analysts had only expected just under 760 million. The combined banking group had already posted profits well above estimates in the first two quarters of 2024.
The Bank continued to benefit from the good conditions on the financial markets in the third quarter. Both private and institutional clients were very active - both in wealth management and investment banking and also across the regions.
Operationally well on the way
In its core business, Global Wealth Management (GWM), the bank attracted just under 25 billion dollars in net new assets. As a result, the entire Group had assets under management totaling 6199 billion dollars at the end of September, benefiting from the positive market trend here too.
The quarterly results demonstrated the strength of UBS's diversified business model, the bank's CEO Sergio Ermotti told analysts on Wednesday. He spoke of "impressive earnings growth" in the business areas despite a volatile market environment.
The banking group also made further progress with the integration of CS. Risk-weighted assets (RWA) in the wind-up unit were further reduced and the bank saved a further 0.8 billion in costs in the third quarter. UBS aims to have saved around 7.5 billion by the end of 2024, which would already correspond to well over half of the total target of around 13 billion by the end of 2026.
Mammoth task ahead
However, the management still has a mammoth task ahead of it. The transfer of CS clients in Switzerland to the UBS platform is set to begin in the second quarter of 2025, following the transfer of client accounts - for example in Luxembourg and Hong Kong - in October, with other countries (Singapore, Japan) set to follow by the end of 2024.
The migration in this country is likely to take around a year. The major undertaking will take place in four waves until the first quarter of 2026, said Ermotti. Given the size of the platform and the number of customers affected, the exercise is likely to release a large proportion of the savings still planned at Group level. This is also due to the large IT infrastructure in Switzerland, which also serves many other regions.
Another unresolved issue is the ongoing political discussion about higher capital requirements for the major Swiss bank. Depending on the outcome of the decision, it could have a major impact on the bank's business and also on future distributions to shareholders. The bank does not expect a decision before the Q4 figures at the beginning of February, when the bank will provide a strategy update. CEO Ermotti nevertheless intends to give an order of magnitude for the planned share buybacks in 2025.
Gloomy economic forecast
In 2024, the bank intends to buy back shares worth up to 1 billion dollars. The buy-backs are to be "continued" in 2025 and return to pre-CS takeover levels in 2026. The dividend for the 2024 financial year is to increase by a mid-teens percentage.
UBS is rather cautious with regard to the further development of the operating business. Despite the positive environment, there are many uncertainties, such as the gloomy economic outlook in many regions, geopolitical conflicts and the upcoming US elections.
UBS shares were the biggest losers on the SMI on Wednesday. They reached a new multi-year high of CHF 29.57 shortly after the opening (+3.9%). However, the gains quickly crumbled and turned into correspondingly large losses: in the early afternoon, UBS was down 3.7 percent at 27.43 francs.
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