UBS posts massive profit of $29 bn in second quarter after Credit Suisse takeover

UBS Group AG on Thursday posted a profit of $28.88 billion in the second quarter this fiscal in the first quarterly earnings after taking over Switzerland’s largest bank Credit Suisse earlier this year. UBS paid a mere 3 billion Swiss francs ($3.4 billion) to acquire Credit Suisse in March to save it from bankruptcy.

Groupwide UBS results include just one month of Credit Suisse earnings as the deal only closed in June.

UBS said the result primarily reflected $28.93 billion in negative goodwill on the Credit Suisse acquisition. Underlying profit before tax, which doesn't include negative goodwill, integration-related expenses and acquisition costs were at $1.1 billion.

Negative goodwill represents the fair value of assets acquired in a merger over and above the purchase price. 

“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,” UBS CEO Sergio Ermotti said in a statement.

In the previous quarter, UBS suffered a surprise 52 per cent annual drop in net profit due to a legacy litigation issue relating to US mortgage-backed securities.

Net profit

UBS reported net profit attributable to shareholders of $29 billion.

The bumper profit is due to a huge one-off gain that reflects the acquisition costs being far below Credit Suisse's value. It was somewhat below a consensus estimate of $33.45 billion from a poll conducted by UBS.

Net Asset outflows

Credit Suisse reported net asset outflows of 39.2 billion Swiss francs ($44.6 billion) in the quarter. UBS's global wealth management reported net new money of $16 billion, its highest for the second quarter in over a decade.

Cost Savings

UBS revised up the amount of cost-savings it expects from the deal to over $10 billion by end-2026, which compares with an earlier estimate of $8 billion by 2027.

Assets

Invested assets for the combined group were $5.53 trillion, while Credit Suisse managed assets of 1.213 trillion Swiss francs.

Headcount

Credit Suisse's headcount shrunk to 33,968 from 36,044 at the end of March. Groupwide for UBS headcount was 119,100.

Revenue

Group revenues were $9.54 billion.

On Thursday the group said Credit Suisse’s domestic banking unit will be fully integrated into UBS with a merging of legal entities expected to close in 2024. Ermotti said the bank’s analysis had determined that this is “the best outcome for UBS, our stakeholders and the Swiss economy.”

Earlier this month, UBS said it had ended 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 when it agreed to take over Credit Suisse in March.