Swiss banking major UBS has put a real estate fund of its former competitor Credit Suisse worth over USD 2 billion into an “orderly liquidation,” the venture informed the media.
The Credit Suisse Real Estate Fund International’s total net assets were worth 1.88 billion Swiss francs (USD 2.17 billion) as of the end of June 2024, UBS said. As per the bank, the fund’s value had fallen significantly during 2023.
UBS, which acquired Credit Suisse in 2023 after its long-time rival collapsed amid a string of financial setbacks, said 36% of the Real Estate Fund International’s total units in circulation in 2022 had been redeemed by the 2023 end.
“The process to sell assets over the past 18 months to meet redemptions has demonstrated the limited depth of the real estate markets,” UBS Fund Management (Switzerland) said, while noting that to meet the outstanding 2023 redemptions, the venture would require the sale of the portfolio’s most liquid assets at an “inopportune time” in the real estate market.
“This would negatively impact remaining investors, decrease the attractiveness of the remaining portfolio and thus be likely to drive further redemptions,” UBS added.
UBS has also agreed to sell Credit Suisse’s US mortgage servicing business, UBS Chief Financial Officer Todd Tuckner announced recently, without naming the buyer.
Todd Tuckner, who was speaking on a call with analysts following the publication of the bank’s latest results, said the transaction was expected to close in the first quarter of 2025.
UBS executives declined to name the buyer on a media call later, though CEO Sergio Ermotti said it was a consortium.
“That’s the only thing we can say, and it’s up to them to communicate,” he added.
The Swiss banking major, meanwhile, has posted a quarterly profit that was double the market forecast, buoyed by investment banking and larger-than-expected savings from the integration of Credit Suisse.
The net profit of USD 1.1 billion for the April-June 2024 period beat the USD 528 million forecast in a company-provided poll for what was UBS’s first results since it formally completed its merger with Credit Suisse in May.
Switzerland’s largest bank said savings from the Credit Suisse integration were occurring faster than forecast, although Deutsche Bank analysts said numbers at UBS’s Global Wealth Management and Personal and Corporate Banking divisions were below expectations, taking some shine off the results.
Ermotti also said the first-half results reflected “significant progress” the bank had made since buying Credit Suisse, leaving it well-positioned to meet targets and return to pre-acquisition levels of profitability.
“We are now entering the next phase of our integration, which will be critical to realise further substantial cost, capital, funding and tax benefits,” Ermotti noted.
“Results varied across divisions. As seen at peers, investment banking flourished, with underlying revenues in the division surging by 26% on the year to USD 2.5 billion. Nearly two-thirds of the increase came from the Americas,” UBS said.
Performance at the non-core and legacy unit was also robust. UBS had also made another USD 0.9 billion in gross cost savings, hitting about 45% of its cumulative annualised target.
The venture aims to achieve $13 billion in savings by the end of 2026. The bank now anticipates reaching $7 billion of that in 2024, having previously targeted around $6.5 billion. Since the second quarter of 2023, the bank has decreased non-core and legacy risk-weighted assets by 42%, with a quarter-on-quarter decline of $8 billion.
Net new asset inflows were USD 27 billion, even as UBS executives warned the outlook was clouded by geopolitical tensions, the United States Presidential election and market volatility.