swiss banking giant UBS Second-quarter net profit topped expectations on Wednesday as revenue rose amid cost-cutting measures at the bank’s global wealth management and investment banking divisions.
Net profit to shareholders for the same period was US$1.136 billion, compared with the company’s consensus forecast of US$528 million.
Still, profit was below the $1.755 analysts expected in the first-quarter report.
UBS shares were up 3% at 11:35 a.m. London time.
Group revenue in the second quarter also exceeded expectations, reaching US$11.904 billion, compared with US$11.522 billion reported by LSEG.
UBS said strong capital markets activity partially offset a drag on net interest income, which it had previously said would weaken due to lower loan and deposit volumes and lower interest rates in Switzerland.
Revenue at the bank’s global wealth management unit rose 15% to $6.053 billion, which UBS said was largely due to the Credit Suisse merger. Revenue at the investment banking unit jumped 38% to $2.803 billion.
“We’ve done pretty well both in investment banking and wealth management,” UBS Chief Executive Sergio Ermotti told CNBC’s Silvia Amaro. Resilience, and I think we’re making good progress in reducing core risks and reducing costs.
“It’s a combination of good revenue momentum and good progress on cost reductions,” Ermotti said of profit growth.
He added that the bank was seeing good momentum from client activity and wealth management transaction volumes, although lower net interest income was creating some headwinds for its margins.
It’s been more than a year since UBS officially took over Credit Suisse, triggering a massive consolidation process that created a wealth management giant. UBS explain In early July, the merger process was completed and Credit Suisse (the Swiss bank that collapsed in March 2023 after years of financial scandals) no longer exists as an independent entity.
Divesting risk-weighted assets – a major part of Credit Suisse’s business – has been a key part of the process.
UBS said it now expects cumulative savings from the Credit Suisse deal to total $7 billion by the end of 2024, compared with a 2022 baseline of $13 billion targeted by 2026. The company had previously aimed to save $6.5 billion by the end of the year.
The bank returned to profitability in the first quarter of 2024 after two quarters of losses related to integration costs.
“The next few years are a work in progress. We are still far from the profitability we had before UBS was asked to step in and save Credit Suisse,” Ermotti told CNBC, adding that the bank’s mandate now includes focusing on the U.S. and Asia-Pacific.
“UBS is accelerating the delivery of factors within its control – cost savings and reductions (in non-conforming loans) – which should provide a headwind against regulatory headwinds,” analysts at RBC Capital Markets said in a note covering Wednesday’s results. Some buffering and potentially more support for more customers.
Too big to fail?
UBS shares soar 51.7% in 2023 as investors focus on advantages of acquiring Credit Suisse, for which UBS paid far less than the bank was worth in the deal Promoted by Swiss regulators.
Shares have fallen 3.75% since the beginning of the year, partly due to reports in April that Swiss authorities proposed new banking regulations that would see UBS and three other “systemically relevant” banks face tougher capital requirements to protect the broader economy.
UBS strongly criticized the proposals as unnecessary, arguing that the bank was not “too big to fail” as the report said and would undermine Switzerland’s global competitiveness.
Ermotti told CNBC on Wednesday that in bailing out Credit Suisse, UBS was “part of” the solution to the instability in the banking sector, not exacerbating it.
Regarding the resistance to European banking consolidation, Ermotti said on Wednesday, “In my opinion, it is necessary for Europe to have larger financial players in order to have its own independence in financial matters.”
He added, “One may have to recognize that after the financial crisis, Europe went too far in fragmenting or not allowing the system to integrate, and that is having a detrimental effect on Europe and its financial system.”
In its second-quarter earnings outlook, UBS said the macroeconomic picture was “overshadowed by ongoing conflicts, other geopolitical tensions and the upcoming U.S. election,” all of which contributed to higher market volatility than in the first half. high.
However, when asked about the recent rise in fears of a U.S. recession – as anticipated by JPMorgan CEO Jamie Dimon and others – Ermotti said there was a chance of a “slower” growth Seems bigger.
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