Swiss bank UBS has exceeded market expectations by posting a quarterly profit that was double the forecast. The bank’s net profit of $1.1 billion for the April-June period surpassed the $528 million forecast in a company-provided poll. This impressive performance was largely attributed to the success of its investment banking division and the faster-than-expected savings from the integration of Credit Suisse, its former rival.
Shares in UBS surged by 6% following the release of the positive results, outperforming the European banking sector. The bank reported that savings from the Credit Suisse integration were progressing ahead of schedule, although some analysts noted that certain divisions, such as Global Wealth Management and Personal and Corporate Banking, fell below expectations. Despite this, UBS CEO Sergio Ermotti expressed confidence in the bank’s progress since acquiring Credit Suisse, stating that they are well-positioned to meet targets and return to pre-acquisition levels of profitability.
Results varied across UBS’s divisions, with investment banking experiencing a significant surge in underlying revenues, particularly in the Americas. The bank also reported robust performance in its non-core and legacy unit. UBS announced that it had achieved $0.9 billion in gross cost savings, reaching approximately 45% of its cumulative annualized target. The bank aims to achieve $13 billion in savings by the end of 2026, with expectations of reaching $7 billion this year.
In addition to cost savings, UBS has made significant progress in reducing non-core and legacy risk-weighted assets, with a 42% decline since the second quarter of the previous year. The bank also finalized the sale of Credit Suisse’s U.S. mortgage servicing business to an undisclosed buyer. Despite geopolitical tensions, the U.S. election race, and market volatility, UBS reported net new asset inflows of $27 billion.
UBS’s acquisition of Credit Suisse in March 2023 was a strategic move that has presented both challenges and opportunities for the bank. While the integration process has incurred significant expenses, UBS remains optimistic about its long-term prospects. Analysts believe that UBS has the potential to become the leading global wealth management player, especially in the ultra-high net worth segment.
Looking ahead, UBS anticipates integration-related expenses of around $1.1 billion in the third quarter, with a modest decline in the pace of gross cost savings. The bank also expects some challenges in net interest income due to mix shifts in Global Wealth Management and the effects of interest rate cuts by the Swiss National Bank. Despite these challenges, UBS remains focused on managing the integration process effectively and capitalizing on the opportunities presented by the acquisition of Credit Suisse.
