UBS sails past earnings estimates as it aims to draw a line under Credit Suisse deal

Swiss banking giant UBS has surged past analysts’ estimates and returned to profit after two straight quarterly losses. The growth was driven by wealth management and investment banking as it continued to integrate former domestic rival Credit Suisse.

UBS reported a net profit of $1.8bn (£1.4bn) in the first three months of 2024, sailing past analysts’ expectations of $598m (£476m).

Its flagship wealth management business posted higher-than-expected new assets of $27bn (£21.5bn), up from $22bn (£17.5bn) at the end of last year. The division’s revenue rose some $500m (£399m) to $6.1bn (£4.9bn), which UBS said was driven by the Americas, Switzerland and Asia-Pacific markets. 

For the second quarter, the bank expected a low-to-mid single-digit decline in net interest income for the wealth business. It flagged reduced lending and deposit volumes, as well as looming base rate cuts from the Swiss central bank for the outlook.

UBS added that it expected a high single-digit decrease in interest income in its personal and corporate banking division as the prospect of lower interest rates

Like its Wall Street rivals, UBS’ investment bank has benefited from a global rebound in dealmaking this year. The business saw a pretax profit of around $555m (£443m). The figure beat analysts’ estimates of $398m (£317m).

UBS triggered the biggest banking merger since the financial crisis when it agreed to buy domestic rival Credit Suisse last March. The state-brokered deal came after years of scandal at the latter firm, resulting in mass client outflows and a share slump.

UBS has said it wants to have completed the legal merger by the end of this month. Chief executive Sergio Ermotti has been battling high costs as he winds down Credit Suisse’s unprofitable businesses while fully integrating its key Swiss banking unit. The process drove two consecutive quarterly losses for UBS in the second half of last year.

UBS said on Tuesday that it had achieved an additional $1bn (£797bn) in gross cost savings during the first quarter, taking total savings since the acquisition to $5bn (£4bn). It is targeting another $1.5bn (£1.2bn) in savings by the end of 2024.

“A little over a year ago we were asked to play a critical role in stabilizing the Swiss and global financial systems through the acquisition of Credit Suisse and we are delivering on our commitments,” Ermotti said on Tuesday.

The shotgun merger has grown UBS’ balance sheet to more than $1.6 trillion (£1.3 trillion), almost twice the size of the entire Swiss economy, triggering concern among regulators.

UBS chair Colm Kelleher said last month that the bank was “seriously concerned” about proposed new rules from the Swiss government that would significantly raise its capital requirements. The government’s announcement has weighed on UBS’ share price, which is down 12 per cent over the last month.