UBS Reports $28.88 Billion Profit in Latest Earnings After Credit Suisse Takeover
July 27, 2023
New York City – UBS, Switzerland’s largest bank, announced on Thursday a strong second-quarter profit of $28.88 billion. This impressive result comes in the wake of the bank’s completion of its takeover of struggling competitor, Credit Suisse.
Analysts had projected a net profit of $12.8 billion for the three-month period ending in June, according to a Reuters poll. The substantial profit reported by UBS far exceeded these estimates.
UBS attributed the impressive result to a significant negative goodwill of $28.93 billion related to the Credit Suisse acquisition. Negative goodwill refers to the fair value of assets acquired in a merger that exceeds the purchase price. UBS acquired Credit Suisse for a discounted 3 billion Swiss francs ($3.4 billion) in March.
Excluding negative goodwill, integration-related expenses, and acquisition costs, UBS reported an underlying profit before tax of $1.1 billion.
UBS CEO, Sergio Ermotti, expressed his satisfaction with the strong performance in a statement. “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,” said Ermotti. “We are winning back the trust of clients, reducing costs, and taking the necessary actions to create economies of scale that will allow us to better focus our resources and target investments for future growth.”
The integration of Credit Suisse’s domestic banking unit into UBS was also announced on Thursday. Both banks expect the merging of legal entities to be completed by 2024. Ermotti stated that the bank’s analysis determined this to be “the best outcome for UBS, our stakeholders, and the Swiss economy.”
The acquisition of Credit Suisse was part of an emergency rescue deal brokered by Swiss authorities in March. UBS recently terminated a 9 billion Swiss franc ($10.24 billion) loss protection agreement and a 100 billion Swiss franc public liquidity backstop that were put in place by the Swiss government during the takeover.
Ermotti assured clients that they will continue to receive premium levels of service following the integration of Credit Suisse’s Swiss banking division. “Our stronger capital base will enable us to keep the combined lending exposures unchanged, while maintaining our risk discipline,” he added.
UBS’s second-quarter results were delayed due to the completion of the Credit Suisse takeover. The bank had originally scheduled the report for July 25. In the previous quarter, UBS experienced a surprise 52% drop in net profit due to a legacy litigation issue involving U.S. mortgage-backed securities.
Despite these challenges, UBS shares have seen a significant increase of nearly 30% since the beginning of the year, according to Eikon.
Please note that this is a breaking news story, and further updates will be provided as more information becomes available.