UBS swung to a larger-than-expected loss on Tuesday in its first full quarterly results since acquiring troubled Credit Suisse, while its shares rose on the back of a strong underlying profit beat.
The Switzerland-based bank posted a net loss of $785m (£637m) in the third quarter, significantly higher than the $444m analysts polled by Reuters had forecast.
The figure marks the company’s first quarterly loss since 2017.
UBS recorded an underlying pretax profit of $844m, with $2.2bn in expenses largely related to its integration of Credit Suisse, which it acquired in June.
The state-brokered deal came after years of scandal at Credit Suisse, resulting in mass clients outflows and a share slump.
UBS’ flagship wealth management business brought in $22bn of net new money.
The bank’s chief executive, Sergio Ermotti, is set to announce a strategy for the merged banks in February but is battling high costs as he winds down Credit Suisse’s unprofitable businesses while fully integrating its key Swiss banking unit.
Opponents argue the integration could cost thousands of jobs in Switzerland and reduce competition, with hundreds of Credit Suisse shareholders mounting legal action this summer over losses incurred from the rushed acquisition.
“We are optimistic about our future as we build an even stronger and safer version
of the UBS that was called upon to stabilise the financial system in March and one that all of our key
stakeholders can be proud of,” Ermotti said.
UBS’ shares leaped on the back of its results last quarter, with the bank reporting $29bn in pretax profit, largely comprising of “negative goodwill” from its acquisition of Credit Suisse.
“Negative goodwill” represents the difference between the low price Credit Suisse was acquired for in March and the book value of its assets.
UBS shares rose four per cent in Switzerland on Tuesday morning as the market focused on the company’s underlying profit of $844m before tax, well ahead of the $206m consensus estimate.
Citi analysts noted that this figure was “notably ahead” of the company’s prior guidance of breaking even and 6 per cent ahead of its above-consensus forecast.
Deutsche Bank analyst Benjamin Goy said UBS reported “another good quarter” with “progress in essentially all key areas”, including capital, net new inflows, cost reduction and underlying profit.
“Even though UBS posted a quarterly loss, the bank is taking great strides forward in its integration of Credit Suisse. To be able to recommit to ambitious targets laid out earlier this year has inspired confidence,” said analysts from Third Bridge.
“Wealth and asset management will be a key battleground going forward, UBS stabilised flows from Credit Suisse, and now longer term it’s critical for the pro-forma bank to be able to grow flows in the US with their increased scale.”
UBS shares are up 26 per cent in the year to date.