UBS Net Profit Beats Expectations on Credit Suisse Savings — 2nd Update

By Adria Calatayud

UBS Group reported a second-quarter net profit that beat analysts' estimates and said it expects more cost savings from its integration of former rival Credit Suisse this year than previously anticipated.

The Zurich-based banking group said Wednesday that it made steady progress on trimming costs and offloading noncore assets, while its key wealth-management arm continued to attract funds from wealthy clients.

Net profit for the second quarter was $1.14 billion compared with $27.33 billion for the same period last year, when the bank's results were boosted by a multibillion-dollar accounting gain on its takeover of Credit Suisse that reflected the deal's knockdown price.

After the accounting effect in last year's second quarter, UBS posted net losses for two consecutive quarters largely due to expense bills of the integration process and swung back to profit in the first three months of the year.

This was UBS's second quarterly net profit in a row and, like in the past quarter, the result beat analysts' estimates by a wide margin. Analysts had forecast a net profit of $528 million, according to consensus estimates compiled by the bank.

"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 stabilize Credit Suisse," Chief Executive Sergio Ermotti said.

UBS agreed to acquire Credit Suisse in March last year in a rescue deal engineered by Swiss authorities to stem a crisis at the troubled lender. The takeover was completed in June 2023 and, since then, UBS has been shedding assets it considers noncore, merging different entities and cutting jobs as part of its work to integrate its former rival.

"We are now entering the next phase of our integration, which will be critical to realize further substantial cost, capital, funding and tax benefits," Ermotti said.

The bank said it now expects to end 2024 with cumulative gross savings from the Credit Suisse deal of $7 billion, out of a target of $13 billion by 2026 compared with a 2022 baseline. It had previously aimed to deliver $6.5 billion in savings by the end of the year.

By June, UBS had delivered savings of $6 billion, including about $900 million in the second quarter. The bank said its pace of gross cost savings will decline modestly in the third quarter.

The bank reduced by $8 billion the risk-weighted assets of its noncore and legacy portfolio--which houses the assets it plans to exit--in the quarter, it said. This means the portfolio shrunk by 42% over the past year, it said. UBS forecast an underlying pretax loss of around $1.1 billion in the second half at the noncore and legacy units.

Expenses related to the Credit Suisse integration and purchase-price allocation effects came to $1.37 billion in the quarter. UBS expects to book a further $1.1 billion in integration-related costs in the third quarter.

On an underlying basis, pretax profit was $2.06 billion compared with $891 million a year before and consensus estimates of $1.61 billion.

Revenue for the quarter rose to $11.90 billion from $9.54 billion, against consensus expectations of $11.55 billion. Revenue grew across all business units.

UBS's core global wealth management business attracted $27 billion in net new assets, in line with the inflows it recorded in the first quarter. The business benefited from positive inflows across all regions, UBS said.

The bank said it is experiencing moderate headwinds in net interest income in global wealth management after the Swiss National Bank cut interest rates, but that client and transactional activity is seeing continued momentum.

Write to Adria Calatayud at adria.calatayud@wsj.com

(END) Dow Jones Newswires

August 14, 2024 02:49 ET (06:49 GMT)

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