UBS profit smashes analyst estimates as it steps up Credit Suisse integration

Swiss banking titan UBS has reported a profit well ahead of analysts’ forecasts for the three months to June as it steps up its integration of fallen rival Credit Suisse.

The bank posted a net profit of $1.14bn (£887m) for the second quarter of 2024, smashing analysts’ estimates of $520.8m (£405m).

The results are the first published since UBS completed its merger with Credit Suisse at a parent company level at the end of May.

UBS struck a state-brokered deal last March to rescue its scandal-hit rival, triggering the biggest banking merger since the financial crisis. Its share price has climbed 47 per cent since it agreed the takeover.

Sergio Ermotti, UBS’ chief executive, said on Wednesday that the bank was “entering the next phase” of integrating Credit Suisse.

“We are well positioned to meet our financial targets and return to the levels of profitability we delivered before being asked to step in and stabilise Credit Suisse,” he commented.

The bank said it had reduced Credit Suisse assets marked for wind-down by 42 per cent since the second quarter of 2023, including $8bn (£6.2bn) between April and June this year.

UBS has laid out plans to buy back around $2bn (£1.6bn) of its shares by 2026 and on Wednesday affirmed its target of repurchasing up to $1bn (£778m) in 2024.

It added that it had achieved $900m (£700m) of additional gross cost savings in the second quarter – reaching some 45 per cent of the cuts it is targeting by 2026.

The bank said it expected to book roughly $1.1bn (£856m) of integration-related expenses in the third quarter, while the pace of gross cost savings would decline modestly.

UBS’ flagship wealth management business attracted $27bn (£21bn) in net new assets during the second quarter. The division’s pretax profit came in lower than analysts expected at $871m (£677m), driven by higher pay for financial advisers.

The bank said it was seeing “positive investor sentiment” and continued momentum in client transactional activity.

It added that ongoing conflicts, geopolitical tensions and US elections were expected to result in higher market volatility than in the first half of 2024.

UBS’ investment bank beat analysts’ estimates with a quarterly pretax profit of $477m (£371m), boosted by higher revenues in global markets, up 18 per cent, and global banking, up 101 per cent, compared to the same period last year.

Swiss authorities have proposed tougher regulation for the enlarged bank as part of so-called “too big to fail” proposals, which analysts have estimated could result in up to $25bn (£19.5bn) in additional capital demands for UBS.

Analysts at Deutsche Bank said in a note that UBS’ global wealth management and personal and corporate
banking units performed “below expectations”, adding that “capital was a touch ahead, cost reductions are quicker than expected and net inflows were decent across global wealth management but not in asset management”.

“Hence, UBS continues to deliver post Credit Suisse takeover but the uncertainty around capital (return) remains high,” they continued.