UBS profits back on track after Credit Suisse merger losses

By Al Mayadeen English
Source: Agencies
7 May 2024 12:11

UBS is hoping to reach an additional $1.5 billion in savings by the end of this year, as the first-quarter net profit of 2024 increased 71% to nearly $1.8 billion.

The logo of Swiss Bank UBS is fixed on a building where UBS has offices in Frankfurt, Germany, Tuesday, November 8, 2022. (AP)

Following two quarters in the red as a result of the mammoth takeover of Credit Suisse, Swiss banking giant UBS stated that the first-quarter net profit increased 71% to nearly $1.8 billion as Switzerland's largest bank noted that turnover increased by 46% to $12.7 billion due to its investment banking arm.

Revenues from investment banking rose by 16% due to a more favorable market climate and good IPO performance in addition to mergers and acquisitions.

UBS chief executive Sergio Ermotti said, "A little over a year ago, we were asked to play a critical role in stabilizing the Swiss and global financial systems through the acquisition of Credit Suisse and we are delivering on our commitments."

He added, "This quarter marks the return to reported net profits and further capital accretion – a testament to the strength of our business and client franchises and our ability to deliver significant progress on our integration plans while actively optimizing our financial resources."

With that, cost drops at UBS persisted, making $1 billion in additional savings during the first quarter, with the total figure since the merger equating to $5 billion, or around 40% of the $13 billion target meant for 2026.

UBS is hoping to reach an additional $1.5 billion in savings by the end of this year.

This comes after Swiss authorities forced UBS last year into a major $3.25 billion takeover to stop Credit Suisse from suffering catastrophic consequences in the global financial system.

UBS was left with a $785 million loss in the third quarter of last year, and another $279 million in the fourth quarter.

'Too big to fail'

UBS' 2024 numbers for the first quarter make it hard to compare with last year's numbers, which was before it formally merged in June 2023.

In the first quarter of last year, UBS had a net profit of barely over $1 billion, as the merger established a megabank of enormous size when compared to the Swiss economy.

In the year after the takeover, UBS shares garnered 59% on the stock market, but shares fell back since April as investors expressed concerns about how much extra the bank will have to put to one side.

The share price plunge was followed by the collapse of several US financial institutions, such as Silicon Valley Bank.

Some experts analyze that UBS may need to establish an additional liquidity cushion of $15 billion to $25 billion, which Finance Minister Karin Keller-Sutter saw as plausible according to her interview with the Tages-Anzeiger newspaper.

Swiss investment manager Vontobel stated investors are anxious to know UBS' views on the government's proposals for new bank regulations deemed "too big to fail", but it added, "However, given the lack of details, it is unlikely that UBS will be able to provide any guidance."

Although monetary relief was expected in the eurozone, the US, and Switzerland, they said, "the timing and magnitude of rate cuts by central banks are unclear, as inflation remains above their target range."

"In addition, the ongoing geopolitical tensions, combined with consequential elections in several major economies, continue to create uncertainty," it added.