UBS smashes forecasts as it prepares for 'next phase' of Credit Suisse takeover

By Louis Goss

UBS shares increased on Tuesday as the Swiss bank outstripped expectations for the second quarter and said it is now preparing to reap the benefits of its acquisition of its main rival Credit Suisse.

The Zurich headquartered bank comfortably surpassed expectations in posting net profit worth $1.14 billion in the second quarter of 2024, versus the $528 million forecast by 14 analysts polled by the financier itself.

UBS, in turn, said it had made "substantial progress" in integrating Credit Suisse following its state-backed acquisition of its main domestic rival for 3 billion Swiss francs ($3.2 billion) in March 2023. That acquisition led to a huge profit of $27.33 billion in last year's second quarter.

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

Shares in UBS (CH:UBSG) (UBS), listed on the Zurich Stock Exchange, increased 1% on Tuesday having previously fallen 3% in the year-to-date following concerns about plans from Switzerland's financial regulator to hike the lender's capital requirements.

UBS said its revenue was boosted by the acquisition of Credit Suisse, which it completed in May this year, even as its profits suffered from various expenses related to the takeover including higher staffing costs.

This saw UBS revenue increase by 25%, to $11.9 billion, driven by the addition of income from Credit Suisse's business, including almost $1 billion worth of net interest income as well as fees from the new subsidiary's investment banking and wealth management divisions.

UBS said it is now ready to "unlock the next phase of the cost, capital, funding and tax benefits we expect to realize by the end of 2026." The bank said it expects to record an additional $1.1 billion worth in integration costs in the third quarter of 2024.

The bank said its acquisition of Credit Suisse had let it realize an extra $900 million worth of cost savings in the second quarter as it said it expects to achieve around $7 billion worth of gross savings by the end of 2024 in line with aims to make $13 billion worth of cuts by 2026.

UBS said it also expects to save on its tax bill through its merger with Credit Suisse as it reported a sharp reduction in the rate it paid in the second quarter to 20%, compared to the 33.4% rate it would have paid without the benefits from its acquisition.

In June, UBS offered to repay the vast majority of all investments put into a group of Credit Suisse funds that were hit by the closure of scandal-ridden financier Greensill Capital in 2021, in line with a push to solve its new subsidiary's legacy issues.

"UBS posted a positive set of results, the beat on net income signals a consistent deliverance and stability within a complex integration," Third Bridge analyst Max Georgiou said. "2024 is a crucial year for the bank and so far it seems leadership is delivering."

-Louis Goss

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08-14-24 0433ET

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