UBS
24.47
CHF
-0.65%
The big bank is making progress with the integration.
The bottom line is that the new UBS Group posted a loss of $279 million in the fourth quarter, as it announced on Tuesday. It is the second quarter in which the acquired CS is fully included. In the third quarter, UBS reported a loss of 785 million.
Before taxes there was a loss of 751 million, which, according to the announcement, included, among other things, a loss of 508 million in connection with the investment in the SIX Group. On an adjusted basis, UBS reports a pre-tax profit of 592 million for the period from October to December 2023.
For the full year 2023, UBS is currently reporting a record profit of 29.0 billion, although this is in connection with the takeover of Credit Suisse. This led to a so-called negative goodwill of 28.9 billion, as the purchase price was significantly below the book value of what was then the second largest Swiss bank.
Distribution to shareholders
The combined bank has further reduced costs. According to the information, costs of around $4 billion have already been saved at the end of the 2023 financial year compared to 2022. Around 4,300 more jobs were cut in the fourth quarter of 2023. The number of full-time positions at the combined bank of UBS and CS was around 113,00 people at the end of December, plus around 25,000 external employees.
The bank wants to save 13 billion on an annual basis by 2026, as it specified on Tuesday. UBS had previously set its cost savings target at more than 10 billion by the end of 2026. Half of the targeted gross savings should be achieved by the end of 2024.
Integration costs in the fourth quarter amounted to almost 1.8 billion. Overall, UBS expects integration costs of around 13 billion by the end of 2026. Around two thirds of this would occur by the end of 2024.
UBS shareholders should now receive a 27 percent higher dividend of $0.70 per share for 2023. In addition, the share buybacks, which are currently on hold due to the CS takeover, are to be resumed in the second half of 2024 – expected to amount to up to 1 billion in the current year.
The bank also wants to return a lot of capital to shareholders in the next few years – including during the integration. It is planning an increase in the dividend per share in the mid-teens percentage range for the current year 2024. In addition, share buybacks in the 2026 financial year are expected to be above the level of 2022, when UBS returned $5.6 billion in capital to its shareholders through share buybacks.
CS business stabilized
The first phase of integration was completed, it was said on Tuesday. “We were able to stabilize Credit Suisse’s business and have made enormous progress in the integration,” said UBS boss Sergio Ermotti, according to the statement. The path in the next few years will not always lead straight, but the strategy is clear.
The high level of customer trust in the bank is reflected in the inflow of assets: UBS recorded a net inflow of new money of $22 billion in its core business – global asset management – in the fourth quarter. Since the takeover of CS was completed, there have been 77 billion in this area, and customer deposits have been returned in the same amount since then.
At the end of December, UBS managed assets totaling 3,850 billion in Global Wealth Management (GWM). It wants to increase this to over 5,000 billion by 2028.
Group-wide assets under management – including asset management and Swiss business – amounted to $5,714 billion at the end of December. At the end of September it was still 5,373 billion.
Merger of Switzerland business in the third quarter
As usual, UBS is cautious about the future, especially since the exact development of interest rates and the course of geopolitical tensions are unclear. However, seasonal factors are likely to have a positive impact on earnings in the first quarter.
The big bank’s focus is now on reducing additional assets and business areas from which UBS wants to exit, as well as further reducing costs. Those CS businesses that the group does not want to keep are grouped together in a “bad bank” called “Non-Core and Legacy”. The adjusted pre-tax loss in the settlement unit is expected to be around $1 billion by the end of 2026.
The next big step is therefore the legal merger of UBS AG and Credit Suisse AG. The big bank expects this to happen by the end of the second quarter of 2024. In Switzerland, the merger of the two local companies is expected to take place before the end of the third quarter, it is said.
UBS boss: The number of branches will be significantly reduced by 2026
UBS will close a significant number of branches in the coming years. After the takeover of Credit Suisse, there were duplications at the branches, which had to be removed, said UBS CEO Sergio Ermotti on Tuesday.
According to him, many branches are likely to disappear. The subsequent total number of branches is likely to be more in the direction of the number of UBS branches before the integration, said Ermotti in a conference call with journalists on the occasion of the results for the 2023 financial year. More details will become clear at the end of 2024 or 2025. There are currently around 190 UBS branches and around 95 CS branches in Switzerland.
UBS wants to complete the merger of the local units in the third quarter. CS Switzerland will then be gradually transferred to the UBS systems in 2025.
The biggest two risks with such an integration are the legal mergers with regard to regulatory hurdles and IT migration, Ermotti continued. With regard to IT, it is important to mention that CS Switzerland is being transferred to the UBS systems. It’s easier and it’s managed well. The shutdown of systems will begin in 2026.
Job cuts in all regions
The global job cuts are now broad-based: There is no focus on specific regions, said CFO Todd Tuckner in response to a question. It is clear that the investment bank and the processing unit make up a large part. The businesses that UBS wants to divest from are parked in the latter.
The further reduction in the current year will mainly take place in the second half of the year. Until the legal merger of UBS and CS on a global level takes place in the second quarter, we will have to rely on the key employees.
In the morning it was announced that around 4,300 more jobs would be cut in the fourth quarter of 2023. The number of full-time positions at the combined bank of UBS and CS was around 113,00 people at the end of December, plus around 25,000 external employees.
Meanwhile, management did not want to answer questions about salary and bonus developments. Only with the compensation report, which will be published on March 28th, will we get a complete picture, said Ermotti.
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UBS shares ultimately lost 4.44 percent to CHF 24.56 in Swiss trading.
Zürich (awp)