Finance & Economics

UBS Returns to Profit

UBS on Tuesday, May 7, announced a return to profit after a period of losses that lasted for two quarters.

UBS Returns to Profit

Against the background of the publication of information on the financial results of the mentioned bank, the indicator of its share price showed an increase of 9%. It is worth noting that last year the lender’s securities rose in price by 51.7%. This is an impressive upward dynamic, the momentum of which has weakened significantly in 2024.

In January-March of the current year, the financial institution recorded a net profit of $1.8 billion. It is worth noting that the consensus forecast of analysts surveyed by LSEG provided that the mentioned figure would be $721.4 million. This result of the financial institution is due to lower expenses and benefits from consolidation after the takeover of Credit Suisse in June last year. UBS agreed to implement the relevant deal in March 2023.

Currently, the Swiss-based banking giant is continuing the process of large-scale integration of its former competitor. The management of the financial institution initially warned that this process would be lengthy and difficult. On Tuesday, an official statement was released about the intention to complete the merger of UBS and Credit Suisse into a single American intermediate holding company in the second quarter of 2024. The completion of the Swiss unit merger process is scheduled for the third quarter of the current year.

UBS revenue for January-March 2024 amounted to $12.74 billion. It is worth noting that in the fourth quarter of last year, this figure was fixed at $10.86 billion.

The revenue of the flagship unit of the financial institution, which specializes in global wealth management, amounted to $6.14 billion in January-March of the current year. The bank’s net new assets reached $27.4 billion in the first quarter of 2024.

The capital adequacy ratio of the financial institution CET1, which is an indicator of liquidity, amounted to 14.8% in January-March of the current year. In the fourth quarter of 2023, this figure was fixed at 14.4%.

Sergio Ermotti, CEO of UBS, expressed satisfaction that the financial institution was able to make very good progress in the implementation of its integration plans. In this context, he noted that the bank has returned to high net profitability and underlying profitability while strengthening its capital. Sergio Ermotti also said that the financial institution still has a lot of work to do before the end of the year.

Johann Scholtz, an analyst at Morningstar, says that UBS’s revenue growth has been very positively received by investors. In this context, the expert also noted that initially the market was concerned that the Credit Suisse merger would provoke revenue attrition, which is why reducing expenses would be the only lever to increase earnings.

Johann Scholtz said that it is highly likely that shortly UBS will focus on managing the balance sheet and accelerating the winding down of the legacy trading positions of the former competitor. According to the expert, appropriate actions will contribute to the release of substantial capital. Johann Scholtz says that the mentioned tactics, combined with the likely increase in future fee income due to net inflows into wealth management, will be sufficient to meet the potential increase in capital requirements that has been discussed by Swiss regulators.

Last month, during Investor Day, UBS Chairman Colm Kelleher criticized proposals to amend capital requirements. In this context, he separately noted that the financial institution is not too big to fail.

As we have reported earlier, UBS Plans to Shut Thousands of Smaller Credit Suisse Asia Accounts.

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.