August 31, 2023: UBS, Switzerland’s biggest bank, has stunned the financial world by announcing a second-quarter profit of $28.88 billion, surpassing expectations set by analysts. This remarkable performance comes in the wake of UBS’s takeover of struggling rival Credit Suisse. The acquisition, completed in March, marked one of the largest and most complex bank mergers in history. The reported profit largely stems from the inclusion of $28.93 billion in negative goodwill related to the acquisition. UBS’s CEO, Sergio Ermotti, highlighted the swift delivery of value following the merger, emphasizing the bank’s commitment to restoring client trust and optimizing resource allocation for future growth.
Underlying profit before tax, excluding negative goodwill, integration expenses, and acquisition costs, reached $1.1 billion. UBS’s capital strength, as measured by the CET 1 capital ratio, rose to 14.4%, up from 14.2% in the previous year’s second quarter. The return on tangible equity (excluding specified costs) was reported at 4.3%, while the CET1 leverage ratio improved to 4.8%, compared to 4.4% a year ago.
In a bold move, UBS announced the full integration of Credit Suisse’s domestic banking unit into its operations. This process is expected to conclude in 2024 and involves merging legal entities. The fate of Credit Suisse’s flagship Swiss bank, a key profit center for the group, was closely watched during the acquisition. UBS’s decision to fully absorb it reflects the bank’s strategic vision, although concerns about potential job losses in Switzerland may arise due to the integration.
The acquisition of Credit Suisse was part of an emergency rescue deal orchestrated by Swiss authorities in March. Recently, UBS terminated a loss protection agreement and liquidity backstop, signaling the bank’s growing confidence in its ability to manage the merged entity. UBS aims to achieve gross cost savings of at least $10 billion by 2026 through the successful integration of all Credit Suisse Group businesses.
Despite a surprise 52% drop in net profit in the previous quarter, attributed to legacy litigation issues, UBS’s shares have surged nearly 30% this year. In a separate filing, Credit Suisse reported a second-quarter net loss of 9.3 billion Swiss francs, accompanied by net asset outflows and decreased assets under management. UBS remains optimistic about client retention and intends to capitalize on its strengthened position in the industry.
With this extraordinary financial performance and strategic integration, UBS is positioning itself as a powerhouse in the global banking landscape. The success of this merger could reshape the financial industry and pave the way for even greater accomplishments in the future.
