UBS reported a loss due to $2 billion in costs associated with the Credit Suisse integration, though the bank still managed an underlying operating profit before tax of $844 million. The consolidation responded to an emergency deal arranged by Switzerland in March and was finalised in June. Analysts from Citi noted that the $844 million PBT was significantly more than previously expected, with their above-consensus figure 6% higher.
On Tuesday, UBS reported a larger-than-anticipated net loss of $785 million for the third quarter as it integrates Credit Suisse, but surpassed underlying profit expectations. This loss was due to $2 billion in expenses related to the Credit Suisse merger. In contrast, the total group revenues increased by 23%, growing from $9.54 billion in the second quarter to $11.7 billion. In addition, the CET1 capital ratio, a measure of bank liquidity, remained unchanged from the previous quarter at 14.4%. UBS Global Wealth Management saw positive net new money inflows for the first time since the beginning of 2022, amounting to a total of $22 billion. CEO Sergio Ermotti expressed optimism about the bank's future, given its success in the following: integration of Credit Suisse, profitability for the Group, strong inflows across wealth management, and the trust and confidence of its clients. An analysts' poll conducted by Citi found that the $844 million underlying profit before tax figure was significantly ahead of the company's break-even guidance, three times higher than consensus estimates, and 6% higher than their above-consensus forecast. The noted beat was attributed to lower-than-expected operating expenses, and higher-than-expected revenues offset by larger provisions. Furthermore, they also commented positively on the acceleration of Wealth Management net new money inflows in September.
Citi declared that Tuesday's report had "overall a good set of results" and held on to its Buy/High Risk assessment. In June, UBS had finished its takeover of its Swiss counterpart and announced in August that it had ceased the 9 billion Swiss franc loss protection agreement and a 100 billion Swiss franc public liquidity backstop that had been enacted for the emergency rescue which was signed in March.The bank's stock climbed to its maximum since late 2008 in August after its second quarter earnings reported a net gain of $28.88 billion from the negative goodwill on the Credit Suisse acquisition.This negative goodwill is the amount of fair value of assets gained in a merger above the purchasing price. UBS spent a discounted cost of 3 billion Swiss francs ($3.33 billion) to take control of Credit Suisse in March, with the Swiss authorities interceding to stop the fall of the looked-to-but scandal-tainted lender.The stock cost has moderated somewhat since, but is still up more than 27% throughout the year.
UBS is currently in the process of merging Credit Suisse's Swiss banking division, a major contributor to its profits, which is likely to involve significant reductions in the latter's workforce. In September, the month following UBS's decision to integrate the Credit Suisse entity, it registered net new deposits of $33 billion under its Global Wealth Management and Personal and Corporate Banking (P&C) arms, with $22 billion coming from former Credit Suisse customers and P&C registering positive flow. Furthermore, UBS has previously declared its objective to achieve gross cost savings of at least $10 billion by 2026, when the amalgamation of all of Credit Suisse Group's companies is expected to be complete.
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