HomeBusinessUBS swings back to profit for first time since Credit Suisse takeover

UBS swings back to profit for first time since Credit Suisse takeover


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Swiss banking behemoth UBS on Tuesday reported a 71% improve in first-quarter internet revenue, reaching almost $1.8 billion, far surpassing expectations, after experiencing two consecutive quarters of losses attributable to the mammoth takeover of Credit Suisse.

Switzerland’s greatest financial institution mentioned its turnover elevated by 46% to $12.7 billion, largely because of its funding banking arm, which had been the important thing a part of the mega-merger.

UBS shares jumped as a lot as 10% and had been on monitor for his or her greatest one-day achieve since March 2023, when authorities orchestrated its rescue of Credit Suisse.

The financial institution’s funding banking revenues elevated by 16%, pushed by a extra favorable market local weather and by the nice efficiency of preliminary public choices (IPOs) and mergers and acquisitions.

Last March, Swiss authorities strongarmed UBS into the $3.25 billion takeover to forestall Credit Suisse from going underneath with catastrophic penalties for the worldwide monetary system.

The financial institution’s outcomes for the primary three months of 2024 had been an opportunity to evaluation its progress since integrating Credit Suisse.

“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,” mentioned UBS chief government Sergio Ermotti.

“This quarter marks the return to reported net profits and further capital accretion – a testament to the strength of our business and client franchises and our ability to deliver significant progress on our integration plans while actively optimizing our financial resources.”

Cost reductions

UBS posted a $785 million loss within the third quarter of 2023 and was down $279 million within the fourth quarter.

Many analysts anticipated UBS’s outcomes to return to optimistic territory following the 2024 first-quarter figures revealed by U.S. banks in the identical league.

Analysts surveyed by the Swiss monetary newswire AWP had, on common, anticipated UBS to put up a internet revenue of $637 million.

But Switzerland’s main financial institution far exceeded expectations, with Swiss funding administration agency Vontobel describing the outcomes as “massively above estimates.”

UBS continued its price reductions, making $1 billion in further financial savings in the course of the first quarter. The cumulative determine because the merger quantities to $5 billion, or almost 40% of the $13 billion goal for 2026.

By the top of the 12 months, the group hopes to realize one other $1.5 billion in financial savings.

Analysts with the Zurich Cantonal Bank mentioned the outcomes confirmed that in an improved setting, UBS might each improve revenues and scale back prices.

“The bank, therefore, still appears to be on track to implement the integration of Credit Suisse in line with the target plan,” ZKB mentioned.

Regulation on the horizon

Though Tuesday’s first quarter figures had been higher than anticipated, buyers are watching to see how UBS offers with looming tighter regulation for Switzerland’s banking sector.

The merger of the 2 largest banks within the nation created a megabank of troubling measurement in relation to the Swiss economic system.

The Swiss authorities unveiled a undertaking final month aimed toward toughening the foundations on banks relating to bonuses and the capital they have to put aside to face a disaster.

According to calculations by some specialists, UBS might have to construct a further liquidity cushion of $15 billion to $25 billion – figures that Finance Minister Karin Keller-Sutter advised a newspaper had been believable.

Ermotti advised a convention with analysts it was “an important discussion for the country,” however whereas hoping for an inexpensive end result it was nonetheless “too early to speculate on the impact” the adjustments might need.

In the 12 months following the Credit Suisse takeover, UBS shares gained 59% on the inventory market.

However, since April, shares have fallen again as buyers fear concerning the further quantities that the financial institution should put to 1 aspect.

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