UBS registers first profit after intervention by Credit Suisse.
The Swiss bank UBS saw its shares jump by 10% on Tuesday in Zurich after reporting a 71% increase in net profit for the first three months of 2024 compared to the previous year. The net profit landed at a hefty $1.8 billion. Despite posting a total loss of nearly $1.1 billion for the last half of 2023, UBS's recent sees a return to success, with revenue skyrocketing 45% to $12.7 billion and a net inflow of $27 billion into their global wealth management business, their most significant division. They also managed to save an impressive $1 billion with their cost reduction strategy, bringing their total cost cuts to $5 billion over the last year.
The CEO of UBS, Sergio Ermotti, consider this latest earnings report a showcase of the company's robustness and its capacity to steer progress on their integration plans. Johann Scholtz, an analyst at Morningstar, agreed with Ermotti's assessment, noting their results exceeded expectations. The apprehension among traders was that the merger with Credit Suisse might end up causing revenue loss, meaning cost reduction would be the lone driver of increased profitability.
However, this had not been the case and, hence, helped drive earnings growth. But despite the positive news, UBS has been hit by regulatory risks. Swiss authorities recently suggested that banks hold more cash and liquid assets to cover potential losses, up to a staggering $27.5 billion. This has caused concern, and UBS asserts that it was not a lack of capital that led to the predicament with Credit Suisse. Ermotti stated that UBS would contribute its input to the regulatory discussions and hopes for a reasonable outcome. He emphasized that his bank is currently in the process of adding roughly $20 billion of capital to cushion the impact of their acquisition.
Since regaining his position as CEO to guide the takeover, Ermotti declared that the current year would be crucial for the combination – a mixture of operations across more than 50 countries. Later that day, he revealed that UBS was on course to reach significant milestones this year, such as merging their Swiss operations in the third quarter. The February announcement which included sizable cost cuts has contributed to a 54% increase in share prices over the course of the past year, yet a recent setback following the Swiss finance ministry's recent proposal put a halt to the momentum.
Moreover, Ermotti reassured analysts that UBS would share their views on the matter and thus remains hopeful for a fair outcome, considering the critical role UBS played in rescuing Credit Suisse, Swiss governments' decision to aid UBS in acquiring its crosstown competitor last year.
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Source: edition.cnn.com
