UBS has reported its first quarterly profit since taking over Credit Suisse, sending its shares up 10 per cent on Tuesday, as the Swiss lender begins to reap the benefits of the contentious rescue of its former rival.
Higher revenues at its wealth management business and investment bank, as well as one-off gains, drove net profits to $1.8bn in the first three months of the year, triple the sum analysts had forecast.
Its wealth management business was again a powerhouse, attracting $27bn in net new assets as clients returned after pulling money from both UBS and Credit Suisse amid the turmoil triggered by the rescue.
Revenues at the division climbed 11 per cent from the previous quarter to $6.1bn. Echoing the performance of many rivals, its investment bank enjoyed a better quarter as revenues rose 16 per cent to $2.8bn. Overall revenues increased 15 per cent to $12.7bn.
Sergio Ermotti, who was parachuted in for a second stint as chief executive to oversee the takeover, said the bank was on course to meet its 2024 capital return targets, having promised to buy back $1bn of shares this year.
The Swiss executive, however, hit out at proposals from the Swiss finance department that would significantly increase the group’s capital requirements. Swiss finance minister Karin Keller-Sutter has suggested this could lead to $15bn-$25bn of additional capital for UBS.
Ermotti told analysts on Tuesday that UBS had not been consulted on the proposals and had no idea what the hit would be for the bank.
“While some modifications to the regulatory regime may be necessary — and we have endorsed many — the discussion around capital should be based on facts,” he said. “That includes a full and transparent account of what led to the idiosyncratic failure of Credit Suisse.”
The prospect of bigger capital requirements has knocked UBS shares over the past month, but they erased much of that loss on Tuesday. The stock was up 10 per cent at SFr27.32 and has climbed 56 per cent over the last year.
UBS also surprised analysts with the speed at which it was running down unwanted parts of Credit Suisse’s investment bank and loan portfolio, resulting in a lower than expected projected loss from the so-called bad bank division of $2.5bn this year, down from a previous expectation of $4bn.
“Overall an impressive set of results. . . although the acknowledgment that [non-core] gains are unlikely to [be repeated] and reiteration of existing cost targets. . . seems to suggest the magnitude of today’s share price move is overdone,” said Citi analyst Andrew Coombs.
UBS executives have warned of a bruising and lengthy integration process, with Ermotti saying that this year would be “pivotal.”
During the first quarter, UBS trimmed expenses by 5.5 per cent. It generated an additional $1bn in cost savings, having eliminated $5bn last year. UBS has said it aims to reduce costs by $13bn by the end of 2026, with a further $1.5bn of savings over the course of 2024.
Chief financial officer Todd Tuckner told analysts on Tuesday that the bank had eliminated 2,000 jobs in the first quarter, meaning the combined bank’s headcount had shrunk by 19,000 since the takeover.
While UBS agreed to buy Credit Suisse in March 2023, the deal was not completed until last June.
UBS reported $78bn of common equity tier one capital on Tuesday. The bank’s CET1 ratio, which compares its core capital with its risk-weighted assets and indicates its financial resilience, was 14.8 per cent, well above regulatory minimums.
“This quarter marks the return to reported net profits and further capital accretion — a testament to the strength of our business and client franchises and our ability to deliver significant progress on our integration plans while actively optimizing our financial resources,” said Ermotti.
