Anika Begay
By Dave Graham
ZURICH (Reuters) – UBS on Wednesday reported a 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 the integration of former rival Credit Suisse.
Net income attributable to shareholders was compared to the $528 million analysts expected in a survey provided by the firm for the bank’s first results since UBS completed its formal legal merger with Credit Suisse in May.
Last year, UBS acquired its historic competitor in a rescue operation orchestrated by Swiss authorities, after the collapse of Credit Suisse, following a series of scandals and financial difficulties.
In a statement, UBS CEO 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 achieve our financial targets and return to the levels of profitability we had before we were asked to step in and stabilize Credit Suisse,” he added.
“We are entering the next phase of our integration, which will be critical to realizing further substantial cost, capital, financing and tax benefits.”
UBS also said it achieved an additional $0.9 billion in gross cost savings, achieving approximately 45% of its cumulative annual gross cost savings targets.
The bank reduced its non-core and legacy risk-weighted assets by 42% from the second quarter of last year, down $8 billion from the previous quarter, it added.
UBS said the macroeconomic outlook was clouded by ongoing conflicts, geopolitical tensions and the upcoming US elections. It expected these uncertainties to persist for the foreseeable future and would likely lead to more market volatility than in the first half of the year.
The bank said it saw positive investor sentiment and continued momentum in customer activity and transactions.
It also saw moderate headwinds in net interest income from ongoing mix changes in Global Wealth Management and the effects of the Swiss National Bank’s second rate cut, which were not yet reflected in UBS’s deposit prices in Personal & Corporate Banking.
The bank said it expected to incur about $1.1 billion of integration-related charges in the third quarter and that the pace of gross cost savings would decrease modestly sequentially. Integration-related charges should be partially offset by about $0.6 billion of accretive purchase accounting effects, it said.
UBS posted a profit of nearly $29 billion in the second quarter of last year, thanks to a large one-time gain that reflected how its acquisition costs were well below the value of Credit Suisse.
In the first half of last year, Swiss authorities oversaw the first merger of two global systemically important banks, according to the Financial Stability Board.
UBS subsequently posted two consecutive quarters of losses as it faced costs to absorb the competitor.
Investors have warmed to the acquisition, boosting UBS shares by more than two-thirds since it bought Credit Suisse in March 2023. However, UBS shares have fallen during recent turmoil in global markets.
Analysts are closely monitoring UBS’s absorption of Credit Suisse, and Ermotti said in May that any delay in the two banks’ technology integration could erode planned cost savings.
Markets are also watching how Swiss authorities will push ahead with plans to tighten banking regulation in an effort to ensure there is no repeat of the Credit Suisse collapse.
In April, the Swiss government unveiled a series of so-called “too big to fail” proposals, outlining how UBS would need to hold additional capital to prevent future crashes.
While the Swiss finance minister has suggested that the sum could be between $15 billion and $25 billion, it is not yet clear how much exactly it will be, and UBS has expressed “serious” concern about the increased capital requirements.
