Swiss bank UBS reported a net profit of $1.14 billion for the second quarter on Wednesday, beating analysts’ forecasts as it enters a new phase of integration with former rival Credit Suisse, Reuters reported.
KEY FACTS
- The net profit distributable to shareholders compared with the $528 million forecast of analysts in a survey provided by the bank. These are the lender’s first results since UBS formally completed its merger with Credit Suisse in May.
- UBS said it achieved a further $900m in savings, reaching around 45% of its ambitions for total annual gross savings.
- The bank reduced non-core and legacy risk-weighted assets by 42% from the second quarter of last year, including by $8 billion quarterly, the bank added.
- UBS acquired its longtime rival last year in a rescue that was orchestrated by Swiss authorities when Credit Suisse collapsed after a series of financial setbacks and scandals.
IMPORTANT QUOTE
“The first half results reflect the bank’s significant progress following the completion of the acquisition. We are well-positioned to meet our financial targets and return to the profitability levels we achieved before we were asked to step in and stabilize Credit Suisse. We are now entering the next phase of our integration, which will be critical to realize further significant cost, capital, financing and tax benefits,” said UBS CEO Sergio Ermotti.
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WHAT TO WATCH FOR
UBS said the macroeconomic outlook is clouded by ongoing conflicts, geopolitical tensions and the upcoming US election. They are expected to lead to higher market volatility than in the first half of the year.
The bank said it expects to record costs in the third quarter of about $1.1 billion related to the integration, and that the pace of gross savings will slow modestly thereafter. Integration-related costs should be partially offset by approximately $0.6 billion of accrual of accounting effects from acquisitions.
UBS reported a profit of almost $29 billion in the second quarter of last year due to a huge one-off effect reflecting how acquisition costs were far below Credit Suisse’s value.
UBS then reported two consecutive quarters of losses due to the costs of its rival’s takeover.
Analysts are closely watching UBS’s takeover of Credit Suisse, and Ermotti said in May that any delay in the two banks’ technology integration could undermine planned cost savings.
Markets are also watching Swiss authorities move forward with plans to tighten banking regulation as they seek to ensure there is no repeat of the Credit Suisse collapse.
The Swiss government in April unveiled a set of so-called “too big to fail” proposals, outlining how UBS would need to hold additional capital to protect against future mishaps.
Although the Swiss finance minister suggested the amount could be between $15 billion and $25 billion, it remains unclear exactly how much it will be, and UBS noted “serious” concerns about increased capital requirements.
