UBS shares rise 3% as market focuses on strong underlying profit

A logo of Swiss bank UBS is seen in Zurich, Switzerland March 29, 2023. 

Denis Balibouse | Reuters

UBS shares climbed on Tuesday morning after the Swiss banking giant resoundingly beat expectations for underlying profit.

The bank recorded an underlying operating profit before tax of $844 million, well ahead of consensus expectations. UBS shares were up 3.2% by mid-afternoon in Europe.

Factoring in $2 billion in expenses related to the integration of fallen rival Credit Suisse, UBS posted a bigger-than-expected third-quarter net loss attributable to shareholders of $785 million. Analysts polled by Reuters had anticipated a quarterly net loss of $444 million in a company-compiled poll.

Here are some other highlights:

  • Total group revenues were $11.7 billion, up 23% from $9.54 billion in the second quarter.
  • CET1 capital ratio, a measure of bank liquidity, was 14.4%, unchanged from the previous quarter.
  • Credit Suisse Wealth Management generated positive net new money inflows for the first time since the first quarter of 2022, contributing to inflows of $22 billion for UBS Global Wealth Management.
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“You could see that, sequentially, we improved the underlying performance across Wealth Management, Asset Management and our Personal and Corporate banking in Switzerland. They both grew on a quarter-on-quarter basis,” UBS CEO Sergio Ermotti told CNBC on Tuesday.

“The IB [investment bank] has been facing more challenging market conditions, particularly when you look at our business model and the fact that we have been onboarding resources from Credit Suisse. But it was a very solid quarter, and we made very good progress in our integration plans, and at the same time we saw very strong inflows from clients.”

A ‘good set of results’

Analysts at Citi highlighted on Tuesday that the $844 million underlying profit before tax figure was “notably ahead of prior company guidance (of break-even), treble consensus expectations and 6% ahead of our above-consensus forecast.”

“As we expected the beat is driven by better opex [operating expense], 7% below consensus, with revenues also 1% ahead. This is then slightly offset by heavier provisions,” they noted, adding that the acceleration of Wealth Management net new money inflows in September was also “encouraging.”

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UBS is also in the process of fully integrating Credit Suisse’s Swiss banking unit — a key profit center — and is expected to cut a hefty proportion of the legacy bank’s workforce.

UBS reported net new deposits of $33 billion across its Global Wealth Management and Personal and Corporate Banking (P&C) divisions, with $22 billion coming from Credit Suisse clients and positive deposit inflows for P&C in September, the month after UBS announced the decision to integrate the domestic bank.

The bank also announced earlier this year that it is targeting gross cost savings of at least $10 billion by 2026, when it hopes to have completed the integration all of Credit Suisse Group’s businesses.

Source: CNBC