UBS returns to profit for the first time since Credit Suisse takeover

People follow the stock market boards at a branch of the UBS bank in Zurich’s Bahnhofstrasse, Switzerland on Friday, Oct. 10, 2008.

The shares of UBS were sent through the roof after the Swiss bank reported that it returned to profitability in the first quarter of 2024, for the first time since it took over its former rival Credit Suisse in June 2023.

The share price of the Zurich-based lender was up by 9.8% after midday, as investors were showered with good news: the profit beat expectations, the lender reported $1.75 billion (€1.63 billion) net income for the first three months, after two consecutive quarterly losses amid cost-cutting measures.

The bank said it had earnings of 52 cents per share.

Total group revenues reached $12.7 billion, 15% more than in the previous quarter. Meanwhile, the bank cut underlying operating expenses by 5% compared to the previous three months.

According to the report, the lender’s capital is getting healthier, UBS’ CET1 capital ratio, measuring how the bank’s capital compares against its risk-weighted assets, was 14.8%, as compared to 14.5% in the previous quarter.

The wealth management division was key to driving revenue

This division reported its total revenues increased by 28%, largely driven by the consolidation of Credit Suisse revenues.

UBS’ global wealth management gained $27 billion (€25.1 billion) in net new assets for the first quarter, beating the previous three months. The total of invested assets surpassed $4 trillion (equivalent to the GDP of Germany).

In its fourth quarter 2023 earnings report, UBS set up an ambitious target for this division. It aims to surpass $5 trillion of “invested assets over the next five years.”

in the last two quarters of 2023, the division generated more than 50% of the overall revenue.

The lender’s personal and corporate banking division also achieved strong performance, with total revenues increasing by 81%, mainly due to the consolidation of Credit Suisse revenues.

Outlook and integrating Credit Suisse

The merger of UBS AG and Credit Suisse AG is expected to be completed by 31 May this year.

“I am particularly pleased by how our firm has come together to bring stability to Credit Suisse’s Wealth Management, Swiss Bank and Asset Management franchises – all are now profitable,” said UBS Group CEO Sergio Ermotti.

UBS plans to reduce its workforce by 50% to 60% of former Credit Suisse employees, equating to approximately 35,000 job cuts. The bank anticipates this initiative will achieve cost reductions of more than $10 billion by 2026. Furthermore, UBS aims to complete the integration of Credit Suisse by the end of 2026.

In its outlook, UBS signalled that it expects a decline in net interest income in its global wealth management and personal & corporate banking divisions, as the Swiss central bank’s interest rate cut in March 2024 takes effect and results in lower lending and deposit volumes and lower interest rates in Switzerland.