The shares of the Swiss banking biggies UBS reached their highest point since late 2008 during the early trade in Zurich on August 30, after the venture posted a mammoth profit tally and announced thousands of layoffs as it plans to fully absorb Credit Suisse’s Swiss operations under its fold.
UBS posted a second-quarter profit of USD 28.88 billion in its first quarterly earnings since Switzerland’s largest bank completed its takeover of stricken rival Credit Suisse.
Analysts had earlier projected a net profit of USD 12.8 billion for the three months to the end of June 2023, according to a Reuters poll. However, the latest UBS profit tally has beaten the projection by close to USD 17 billion.
UBS also said that the result primarily reflected USD 28.93 billion in negative goodwill on the Credit Suisse acquisition. Underlying profit before tax, which excludes negative goodwill, integration-related expenses and acquisition costs, came in at USD 1.1 billion.
UBS also stated that its merger with Credit Suisse and the full absorption of its Swiss unit would result in 3,000 job cuts in the coming days, while adding that the move was increasing UBS’ ambitions for cost savings to over USD 10 billion across the group.
“Our analysis clearly shows that a full integration is the best outcome for UBS, our stakeholders and the Swiss economy,” Chief Executive Sergio Ermotti told Reuters.
“The two Swiss entities will operate separately until their planned legal integration for 2024 with the gradual migration of clients onto UBS systems expected to be completed in 2025,” the senior official added further.
“The prediction of over $10 billion in cost-savings by the end of 2026 compares with an earlier estimate of $8 billion by 2027. Most savings are set to come from reducing headcount. Hanging on to existing Credit Suisse clients is seen as key if UBS is to successfully pull off the Herculean deal,” Reuters stated further.
Credit Suisse reported net asset outflows of 39 billion Swiss francs (USD 44.4 billion) in the second quarter of the 2023-24 financial year, underscoring that the rescue had failed to stem the loss of confidence in its franchise.
However, UBS said that the outflows took place at a slower pace compared to previous quarters and turned positive in June 2023. UBS’s global wealth management reported a net new money flow of USD 16 billion, its highest for the second quarter in over a decade.