UBS returns to profit as wealth, investment bank drive beat

© Keystone/Ennio Leanza

UBS Group AG returned to profit after two loss-making quarters, with both wealth management and the investment bank adding to sustained progress in the integration of Credit Suisse after its emergency rescue last year. 

The Zurich-based bank said net income in the first quarter was $1.8 billion (CHF1.6 billion), compared with analysts’ estimates of $598 million. The key wealth management unit saw net new assets come in better than expected at $27 billion, while the combined investment bank reported an upbeat performance in the United States that helped return the first profit since the takeover.

With the bank targeting the completion of the legal merger with Credit Suisse by May 31, a robust set of results will buttress UBS Chief Executive Officer Sergio Ermotti as he grapples with a tightening regulatory outlook. The Swiss government said last month that UBS should maintain substantially higher capital levels going forward, a development that has weighed on the lender’s share price. 

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“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,” Ermotti said in the earnings release on Tuesday. 

In its outlook, UBS however signalled that the turning central-bank rate environment is beginning to impact earnings from lending. The bank expects a “low to mid single-digit decline” in net interest income in the wealth management unit and a high single-digit decrease in interest income in the personal and corporate banking unit. On the integration, UBS said it had realized about $1 billion in cost savings in the first quarter and was targeting another $1.5 billion by the end of 2024. 

Revenue in the wealth management unit rose to a reported $6.1 billion in the quarter, from $5.6 billion at the end of December. The bank said that the Americas, Switzerland and Asia-Pacific in particular drove the result. 

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UBS’s investment bank posted before-tax profit of about $555 million, compared with analyst estimates for $398 million. In asset management, before-tax profit came in at $111 million, below estimates. 

Capital plans

The Swiss Federal Council wants systemically-important banks to hold significantly more capital against their foreign units to protect against future risks. UBS faces a capital hit that could reach about $20 billion if the reforms come into effect. The proposals are designed to make the country’s banking sector safer and address a weakness that helped accelerate Credit Suisse’s demise last year.

UBS executives have spoken out again the need for more capital. UBS Chair Colm Kelleher said last month that the proposal is the “wrong remedy” to the failure of Credit Suisse, adding the lender is “seriously concerned” about some of the discussions around additional buffers.

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The bank said its CET1 ratio, a measure of capital strength, was 14.8% at the end of the quarter, which it says allows execution of its existing plans to return funds to shareholders. The bank said it can’t yet fully assess the impact from the new rules. The Swiss government is likely to implement the new ordinance in 2026 at the earliest. 

In March UBS said it would buy back up to $2 billion of its shares over the next two years. The bank said its ambition is for share repurchases to exceed its pre-acquisition level by 2026.

©2024 Bloomberg L.P.

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