UBS Q2 Profit Soars, To Integrate Credit Suisse Swiss Unit; Stock Up

Shares of UBS Group AG were gaining around 6 percent in the morning trading in Switzerland as well as 5 percent in pre-market activity on the NYSE after the banking major reported Thursday significantly higher profit in its second quarter primarily reflecting a $29 billion negative goodwill on the acquisition of Credit Suisse Group, as well as higher revenues.

Looking ahead for the third quarter, UBS expects Group underlying profit before tax to be at around breakeven, and to deliver positive underlying profit before tax in the second half.

The company also announced its decision to integrate Credit Suisse AG’s Swiss unit Credit Suisse Schweiz AG. Closing of the legal entity merger is expected in 2024. The company said it aims to substantially complete the integration by the end of 2026.

By that time, gross cost reductions are expected to be over $10 billion. Cumulative integration-related expenses would be broadly offset by accretion-to-par effects of around $12 billion related to fair value adjustments applied to amortized-cost financial instruments.

Meanwhile, UBS chief executive Sergio Ermotti reportedly said the full absorbtion of Credit Suisse Swiss unit would result in around 3,000 job cuts in Switzerland in the coming years. The integration of Credit Suisse Schweiz will result in aound 1,000 redundancies, and the overall restructuring would lead to about 2,000 additional redundancies over the next couple of years in the country.

In its statement, UBS noted that the company and Credit Suisse’s Swiss Bank will operate separately until their planned legal integration for 2024 with the gradual migration of clients onto UBS systems expected to be completed in 2025.

Based on the integration plans and excluding integration-related expenses and accretion-to-par effects, the company aims to achieve an exit rate cost income ratio of less than 70 percent by the end of 2026, and to progress toward a 2026 exit rate return on CET1 capital of around 15 percent.

The latest second-quarter results included results for the former Credit Suisse business from June 1, 2023.

For the second quarter, net inflows into deposits for the combined group were $23 billion, of which $18 billion was from Credit Suisse’s Wealth Management and Swiss Bank.

UBS Global Wealth Management saw net new money or NNM inflows of $16 billion, the highest second-quarter inflows in over a decade, and Asset Management NNM was $17 billion.

For the second quarter, Group net profit attributable to shareholders was $28.88 billion or $8.99 per share, up from last year’s $2.11 billion or $0.61 per share. Profit before tax was $29.24 billion, higher than $2.62 billion a year ago.

The latest results included $28.93 billion of negative goodwill and $830 million integration-related expenses and acquisition costs.

Credit Suisse AG reported a second-quarter US GAAP pre-tax loss of 8.9 billion Swiss francs. Adjusted pre-tax loss was 2.1 billion francs.

Credit Suisse sub-group loss before tax for the month of June was $1.21 billion, including net credit loss expenses of $724 million and integration-related expenses and acquisition costs of $374 million.

UBS’ underlying group profit before tax was $1.1 billion for the second quarter, of which $2.0 billion was from the UBS sub-group.

Total revenues grew 7 percent to $9.54 billion from last year’s $8.92 billion. Net interest income grew 3 percent from last year to $1.71 billion.

Global Wealth Management total revenues increased 1 percent and net interest income increased 14 percent. Personal & Corporate Banking’s revenues climbed 24 percent with a 45 percent growth in net interest income.

Asset Management total revenues, meanwhile, were down 64 percent, primarily due to the absence of last year’s gain from the sale of shareholding in the Mitsubishi Corp.-UBS Realty Inc. joint venture. Excluding that gain, revenues decreased 5 percent.

Investment Bank total revenues decreased 10 percent.

In Switzerland, UBS shares were trading at 23.48 francs, up 6 percent.

In pre-market activity on the NYSE, UBS shares were gaining around 5 percent to trade at $26.54.

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