UBS posts bigger-than-expected quarterly loss as Credit Suisse integration costs pile up

UBS on Tuesday reported a bigger-than-expected third-quarter net loss of $US785 million ($1.2 billion) as it works to integrate fallen rival Credit Suisse.

Analysts polled by Reuters had anticipated the Swiss banking giant would record quarterly net loss of $US444m in a company-compiled poll.

The loss was driven by $US2b in expenses related to the Credit Suisse integration, with the bank recording an underlying operating profit before tax of $US844m.

Here are some other highlights:

• Total group revenues were $US11.7b, up 23 per cent from $US9.54b in the second quarter.
• CET1 capital ratio, a measure of bank liquidity, was 14.4 per cent, unchanged from the previous quarter.
• Credit Suisse Wealth Management generated positive net new money inflows for the first time since the first quarter of 2022, contributing to inflows of $US22b for UBS Global Wealth Management.

“We are executing on the integration of Credit Suisse at pace and have delivered underlying profitability for the Group in the first full quarter since the acquisition. Our clients have continued to place their trust and confidence in us, contributing to strong inflows across wealth management and our Swiss franchise,” chief executive Sergio Ermotti said in a statement.

“We are optimistic about our future as we build an even stronger and safer version of the UBS that was called upon to stabilise the financial system in March and one that all of our key stakeholders can be proud of.”

UBS completed its takeover of its stricken domestic rival in June and announced in August that it had ended a 9 billion Swiss franc loss protection agreement and a 100 billion Swiss franc public liquidity backstop that were put in place when the emergency rescue was agreed in March.

The bank’s shares soared to their highest point since late 2008 in August after its second quarter earnings results reported a $US28.9b net profit as a result of negative goodwill on the Credit Suisse acquisition.

Negative goodwill represents the fair value of assets acquired in a merger over and above the purchase price. UBS paid a discounted 3 billion Swiss francs to acquire Credit Suisse in March, in a deal mediated by Swiss authorities to prevent the collapse of the storied but scandal-plagued lender.

The stock price has since moderated slightly, but remains up more than 27 per cent compared to the prior year.

UBS is also in the process of fully integrating Credit Suisse’s Swiss banking unit — a key profit centre — and is expected to cut a hefty proportion of the legacy bank’s workforce.

UBS reported net new deposits of $US33b across its Global Wealth Management and Personal and Corporate Banking (P&C) divisions, with $US22b coming from Credit Suisse clients and positive deposit inflows for P&C in September, the month after UBS announced the decision to integrate the domestic bank.

The bank also announced earlier this year that it is targeting gross cost savings of at least $US10b by 2026, when it hopes to have completed the integration all of Credit Suisse Group’s businesses.

CNBC