UBS Reports Billion-Dollar Profit Amid Credit Suisse Integration

Despite integration costs, UBS achieved a billion-dollar profit in Q2 2024, affirming progress in its Credit Suisse integration and cost-saving goals.

Swiss banking giant UBS has once again managed to pull a billion-dollar rabbit out of its hat, reporting a net profit of $1.14 billion (CHF 985 million) for the second quarter of 2024, despite the not-so-small elephant in the room: the integration of Credit Suisse. This financial wizardry, however, is a tad less impressive than the first quarter's $1.76 billion profit, but hey, who’s counting when you’re still in the black?

Now, if we were to play a game of “compare and contrast” with last year’s figures, we’d find ourselves in a bit of a pickle. In Q2 2023, UBS boasted a jaw-dropping record profit of $29 billion, thanks to the acquisition of Credit Suisse. The reason? A little something called “negative goodwill,” which sounds like a fancy term for getting a great deal on assets that were worth way more than what UBS actually paid. Talk about a steal!

In terms of pre-tax profit for the second quarter of 2024, UBS reported $1.47 billion, which, you guessed it, is also lower than the $2.38 billion from the first quarter. But let’s not forget the underlying pre-tax profit, which, after excluding various one-off effects (mostly related to the Credit Suisse integration), stood at a respectable $2.06 billion. Analysts had their calculators out, expecting a mere $600 million profit, so UBS’s performance was a pleasant surprise, much like finding an extra fry at the bottom of the bag.

CEO Sergio Ermotti was all smiles in the press release, highlighting the progress UBS has made since completing the Credit Suisse takeover. The bank is feeling confident about hitting its financial targets and returning to the profitability levels it enjoyed before it had to play superhero in stabilizing Credit Suisse. In its core business of asset management for wealthy clients, UBS attracted a whopping $27 billion in new assets. By the end of June, UBS managed a staggering $5,873 billion in assets, up from $5,848 billion at the end of March. That’s a lot of zeros!

As for the integration of Credit Suisse, things are moving along faster than a kid on a sugar rush. The merger of UBS AG and Credit Suisse AG was completed at the end of May, and the transfer of clients to UBS platforms in Luxembourg, Hong Kong, and Singapore is set to kick off in the fourth quarter. UBS is ahead of schedule with its ambitious cost-saving target of $13 billion annually by the end of 2026. In Q2 alone, the bank achieved gross cost savings of $900 million, bringing the annualized total to around $6 billion, with expectations to hit about $7 billion by the end of 2024.

However, UBS does anticipate a slight slowdown in the pace of cost savings in the third quarter, alongside an expected integration-related cost of around $1.1 billion. But don’t worry, they plan to offset this with some value increases related to the purchase price allocation. The NCL run-off unit is expected to take a hit, with a pre-tax loss of around $1 billion in the latter half of the year.

Looking ahead, UBS is optimistic about the earnings outlook, buoyed by positive investor sentiment at the start of the third quarter and “continued momentum” in client activity. However, they are bracing for some headwinds in interest income, thanks to the Swiss National Bank’s interest rate cut and a shift in the investment mix in asset management that could dampen things a bit.

And let’s not forget about UBS’s share buyback program, which is moving at breakneck speed. Since June, the bank has already purchased shares worth $467 million. So, while UBS navigates the choppy waters of integration and cost savings, it seems they’re still managing to keep their financial ship afloat—albeit with a few waves along the way.