New York, United States – UBS, the Swiss banking giant, reported a significant profit beat on Wednesday, exceeding analyst expectations after successfully migrating clients following the integration of collapsed rival Credit Suisse. The net profit attributable to shareholders reached $1.43 billion, surpassing the forecasted $667.5 million in a survey of analysts.
Group revenue also exceeded expectations at $12.33 billion, compared to the anticipated $11.78 billion. Notably, the third quarter saw an operating profit before tax of $1.93 billion, a marked improvement from the previous year’s loss of $184 million. Additionally, the return on tangible equity rose to 7.3% from 5.9% in the second quarter, while the CET 1 capital ratio stood at 14.3%, slightly down from 14.9% in the prior quarter.
UBS announced plans to complete a $1 billion share buyback program in the fourth quarter, with intentions to continue repurchasing shares in 2025. The bank’s turnaround to profitability in the first quarter of 2024 follows two consecutive quarterly losses associated with the Credit Suisse takeover, a process met with warnings from the OECD and government concerns over the banking juggernaut’s capital requirements.
The merger spurred UBS to focus on expense reduction, projecting gross savings of $7 billion by the end of 2024 from the Credit Suisse deal, out of a targeted $13 billion by 2026. The ongoing task of integrating IT systems with Credit Suisse and migrating clients is expected to take around 18 months. Recent migrations of Global Wealth Management client accounts in Luxembourg, Hong Kong, Singapore, and Japan demonstrate progress in this endeavor.
CEO Sergio Ermotti is tasked with steering UBS in a landscape marked by geopolitical uncertainty, declining interest rates, and pressure to match the profit growth of U.S. competitors like Goldman Sachs and Morgan Stanley. Domestically, the bank navigates challenges in a Swiss economy characterized by a strong franc and low inflation, raising questions about potential monetary policy adjustments by the Swiss National Bank and its impact on commercial lender profitability.
UBS’s robust performance follows the profit beat by Deutsche Bank, Germany’s largest lender, and aligns with the trend of European lenders releasing third-quarter reports, including BNP Paribas and Santander. With ongoing efforts to streamline operations, reduce expenses, and maintain competitiveness, UBS aims to navigate the evolving financial landscape while delivering value to shareholders and clients.