Finance & Economics

UBS Reports Loss on Costs of Credit Suisse Takeover

UBS has faced significant losses in the first full quarter since the acquisition of Credit Suisse, a lender that competed with this bank and was on the verge of collapse, was completed.

UBS Reports Loss on Costs of Credit Suisse Takeover

On Tuesday, November 7, the specified financial institution reported that in the period from July to September, losses were recorded, the amount of which amounted to $785 million. The lender clarified that this negative indicator is partly due to the costs associated with the acquisition of the said competitor.

At the same time, UBS reported a significant inflow of customer funds. Against the background of this positive circumstance, which was definitely good news for investors, the share price of a financial institution showed an increase of 4% in Zurich.

The net inflow of new money into UBS’s global asset management business was recorded at $22 billion. This very impressive figure is because the financial institution was able to gain new customers. Also in this case, an important factor influencing the result was the return of assets of those who raised funds immediately after the takeover of Credit Suisse. The mentioned figure also includes receipts to the unit of the bank, which is part of the ownership structure of UBS, for asset management, which became positive for the first time in 18 months.

The total amount of net new deposits raised by UBS group that absorbed a competitor amounted to $33 billion. Two-thirds of these funds came from old Credit Suisse customers.

According to the results of the third quarter, the income of a financial institution from investment banking operations showed an increase of 36% compared to the result of a year ago. The lender’s revenue from stock trading decreased by 3% year-on-year. This negative result is due to the difficult market situation. The current state of affairs in this area has caused ambiguous indicators of the activity of Wall Street banks.

Due to the smaller business of trading fixed income, interest rates, and currency, the revenue of the financial institution in the third quarter showed a decrease of 37% compared to a year ago. This result is significantly worse than that of US trading houses.

CEO Sergio Ermotti was returned to the leadership of UBS a few days after it became known about the takeover of a competitor, which was a deal organized by the Swiss government. Mr. Ermotti plans to present the financial institution’s growth strategy early next year. Its official statement indicates that customers continue to trust the lender, which contributes to the inflow of funds through wealth management and the Swiss franchise. He also stated that he is optimistic about the prospects of the financial institution’s activities in the future, separately noting in this context that the process of creating a stronger and safer version of the bank is currently underway.

Deutsche Bank analysts Benjamin Goy and Sharath Kumar said that, in their opinion, the last quarter was a good one for UBS. They separately noted that the net influx of new clients of the financial institution continues for all units. Analysts drew attention to the fact that the process of cost reduction is carried out ahead of schedule. The leading dynamic is also characteristic of the basic quarterly profit of a financial institution. Analysts urged investors to buy the bank’s shares.

Expert Alison Williams says that the main flows of UBS and the dynamics in the acquired business of Credit Suisse are decisive factors in the success of the deal. According to him, more than $3 billion of net new money was up to $2 billion around September. This follows $1 billion through August 28, and $17 billion in cash inflows to deposits. The expert notes that aggregate cash flows and deposits improved in the last quarter. In his opinion, the acceleration of the reduction of non-core assets is a positive process. It is currently expected that the cost of integrating Credit Suisse’s in the new ownership structure in the fourth quarter will be $1 billion after $2 billion in the period from July to September.

As we have reported earlier, UBS Outlines Major Targets for Its Integration of Credit Suisse.

Serhii Mikhailov

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Serhii’s track record of study and work spans six years at the Faculty of Philology and eight years in the media, during which he has developed a deep understanding of various aspects of the industry and honed his writing skills; his areas of expertise include fintech, payments, cryptocurrency, and financial services, and he is constantly keeping a close eye on the latest developments and innovations in these fields, as he believes that they will have a significant impact on the future direction of the economy as a whole.