UBS reported a pretax profit of £22.8bn ($29.2bn) thanks to its takeover of long time rival Credit Suisse, as it confirmed it will controversially integrate the bank’s domestic lending.
UBS’s pretax profit soared to $29.2bn, with the vast majority of this comprising a ‘negative goodwill’ of $28.9bn. ‘
Negative goodwill’ reflects the difference between the knock-down price Credit Suisse was acquired for in March and the book value of its assets.
On an underlying basis, UBS’s pretax profit was $1.1bn compared to around $1.5bn last year.
The bank confirmed it will integrate Credit Suisse’s domestic bank in spite of domestic opposition – which was the only Credit Suisse division to turn a profit last year.
UBS chief executive Sergio Ermotti said “our analysis clearly shows that full integration is the best outcome for UBS, our stakeholders and the Swiss economy”.
Opponents to the integration suggest it could cost thousands of jobs in Switzerland and reduce competition significantly. But UBS said “Competition in the Swiss market remains robust” despite the decision. The two domestic banks will be legally integrated in 2024.
Credit Suisse meanwhile reported a loss of CHF8.9bn after clients pulled CHF39bn in the second quarter, reflecting the difficult UBS will have in hanging on to many of Credit Suisse’s clients. UBS said that the outflows were at a slower pace compared to the previous quarters.
UBS’s wealth management business in contrast secured $16bn in new money, the highest second-quarter inflows for over a decade
UBS said it hopes to “substantially complete” the integration by the end of 2026 with hopes to cut costs by more than $10bn in that period. Much of this will likely come from reducing staff with reports suggesting around half of Credit Suisse’s workforce could be let go.
Ermotti said: “Two and a half months since closing the Credit Suisse acquisition, we are wasting no time in delivering value for all our stakeholders from one of the biggest and most complex bank mergers in history.”
“We are humbled by this task, and the responsibility entrusted to us,” he continued.
Today’s results were delayed by a month due to the deal’s complexities and give investors the first of how UBS will go about completing the deal.
The takeover of Credit Suisse was engineered by Swiss authorities in March to prevent a broader financial meltdown. It is the largest banking merger since 2008 and will create a banking behemoth with over $5trn in assets, twice the size of Swiss GDP.
All in all, UBS estimates that it will take a $17bn hit from the takeover of Credit Suisse, resulting from a $13bn hit from fair value adjustments and $4bn in potential litigation and regulatory costs.