Tag: UBS

Switzerland’s largest bank reports strong transactional activity in its core business and expects to achieve its objective of $100 billion in net new assets by the end of the year.

UBS is turning the upheavals and drama of 2023, and its fraught government-prompted takeover of Credit Suisse, into a dim national memory receding in the rearview mirror of Swiss business history.

In its third-quarter ad hoc announcement released on Wednesday, the bank reported an underlying pre-tax profit of $2.4 billion, which it said was an ample indication of the strength of its client franchises.

Overall, group revenues were up 5 percent year-on-year but gained 9 percent on an underlying basis, with the aforementioned transactional activity recurring fee income more than offsetting the expected headwinds impacting net interest income after key central banks started cutting interest rates in the quarter.

Invested assets were up 15 percent at $6.2 trillion as it experienced «continued client momentum» with $25 billion in net new assets in its core global wealth management business, putting it on «on track» to deliver its ambition of bringing in $100 billion in net new assets for the whole of 2024.

Overall, the market environment remained constructive in the third quarter but also showed «signs of dislocation and volatility».

UBS generated $15 billion in net new fee-generating assets and saw strong discretionary mandate sales in all regions despite continued pricing discipline.

It also recorded strong transactional activity in global wealth management and the investment bank, with the former’s revenues up almost a fifth (19 percent) with the latter gaining by practically a third (31 percent).

The high levels of transactional activity came from both private and institutional clients, with global wealth management seeing strong momentum in all regions led by the Americans and the Asia Pacific (APAC).

In its investment bank, the global markets business saw gains also coming from all regions, but «particularly» in the Americas. The global banking business experienced strong M&A performances in Asia and the US. In UBS’s Swiss home market, it granted or renewed around 35 billion francs in loans.

Beyond that, it indicated that many facets of its integration with Credit Suisse, the country’s erstwhile second-largest bank, remained on track. It completed the first wave of client migrations in Luxembourg and Hong Kong this month. Singapore and Japan are expected to be finalized by the end of the year, with Switzerland up in 2025.

It is on target to reach the expected $7.5 billion in cost cuts this year after it managed to realize an additional $800 million in savings in the third quarter, with a further $5 billion in risk-weighted asset reductions in non-core and legacy ahead of plans.

As a result, it expects to be in a position to save about $13 billion (gross) by the end of 2026.

It also maintained that it would complete $1 billion in share repurchases in the fourth quarter and it intends to keep making them in 2025 although that will depend on the country’s review of its capital regime requirements.

It also announced several AI initiatives to benefit clients and employees, including a new proprietary AI assistant for 20,000 employees in Switzerland, Hong Kong, and Singapore with «easy» access to product information and investment research.

In the investment bank, it is piloting a proprietary AI algorithm that researches and compiles M&A buy-side targets.

UBS indicated that it expects a continuation of the current market trends in the fourth quarter given expectations for a soft landing in the US economy despite macroeconomic conditions remaining clouded elsewhere in the world.

In the fourth quarter, we anticipate a mid-single digit decline in net interest income in Global Wealth Management and a low single-digit decline in Personal & Corporate Banking. Non-core and legacy is expected to generate a quarterly pre-tax loss in line with our earlier guidance, the bank indicated.

Switzerland’s largest bank indicated that profitability in the second quarter returned to the levels it saw before being forced to rescue Credit Suisse.

UBS indicated that profit before taxes in the second quarter was $1.5 billion, a media release sent by the group on Tuesday (year-earlier figures are not directly comparable given the first-time integration of Credit Suisse).

The bank nevertheless said it experienced continued client momentum, with its core wealth management business seeing net new assets of $27 billion.

Of the net new assets, UBS said $16 billion were fee-generating assets. In the first half, net new assets totaled $54 billion, it indicated.

Beyond that, UBS’s investment bank saw strong transactional activity, with the Global Markets business, where revenues were up 18 percent, experiencing its best second-quarter performance since 2013.

Overall, the bank maintained that it had returned to the levels of profitability it had before being forced to rescue its former peer and competitor, Credit Suisse.

We are now entering the next phase of our integration, which will be critical to realize further substantial cost, capital, funding and tax benefits, the media release stated.

It realized additional cost savings of $0.9 billion in the second quarter, which corresponds to 45 percent of the cuts it is targeting by the end of 2026.

By the end of this year, it expects to be in a position to realize 55 percent, or more than half, of its final target.

The bank also managed to reduce risk-weighted assets in its non-core and legacy business by 42 percent year-on-year while its CET1 capital ratio was at 14.9 percent and its CET leverage ratio at 4.9 percent.

It also restarted its share buyback program with the total amount of shares bought back at $467 million as of 9 August.

The outlook for the remainder of the year continues to be «clouded by ongoing conflicts, other geopolitical tensions and the upcoming US elections.

Entering the third quarter, we are seeing positive investor sentiment and continued momentum in client and transactional activity,» the bank maintained.

It is a year since the government and regulators forced UBS to rescue Credit Suisse. The recent news of job cuts in Asia makes it very clear what could be just around the corner for the domestic financial hubs.

UBS is cutting about 70 jobs in Asia, according to various media reports on Thursday. Most of the redundancies are taking place in Singapore and Hong Kong.

The step also ostensibly affects the bank’s core Global Wealth Management (GWM) business even though the number of employees has been growing steadily in that region since 2022. But as UBS reported in February, the Asia Pacific made significantly less money in the fourth quarter of last year. Pre-tax profit fell by 46 percent to $97 million compared to the same period a year earlier. At the same time, the cost-income ratio rose to 87.7 percent.

That is in itself remarkable. Besides the US, Asia is a strategic growth market for the bank. Both regions are integral to its future financial success and key to its investment growth story with UBS making large investments in both markets in recent years. The results are there for everyone to see, particularly after integrating Credit Suisse’s business. There is no other bank in Asia that has such a large wealth management business with such high levels of invested assets.

At the end of 2022, before the forced takeover of Credit Suisse, about 16,500 individuals worked at UBS in Asia Pacific. At the time, that was 22 percent of the group’s entire workforce.

The current job cuts are likely due to plain economics. But they also have to be seen in the context of a wider restructuring. This has now started just about a year after the government and regulators forced UBS to take over its former rival and Switzerland’s second-largest bank. That is also exactly what the bank announced in February.

Singapore, Hong Kong, and Luxembourg come first, followed by Switzerland afterward, an order of events that is expected to hold up over the next few years.

We got a taste of that this year. In April, the bank will start consolidating its branch network with that of Credit Suisse’s domestic business. About 85 branches belonging to both will be impacted by the consolidation. What is currently happening in Singapore and Hong Kong shows what can be expected in Switzerland very soon.

Moreover, when following the UBS schedule step-by-step, it is clear that the domestic market is to see very significant disruption.

The integration of the franchises of the country’s two largest banks will change the financial hub sustainably and substantively. And it will be on a scale that we can’t yet really imagine. With that, the fact that UBS’s management is not wasting any time should be welcomed. The sooner the process is completed, the sooner the bank can concentrate on its actual job. Focusing on doing business with clients.

As part of that, it will be this exact core business experiencing the current round of cuts that will determine the success of its efforts to become a wealth management powerhouse – both in Asia and Switzerland.

The dust has settled since Switzerland’s largest bank announced it would completely integrate all of Credit Suisse. The third quarter is likely to slip by far more quietly even though it still faces stiff challenges.

The usual UBS earnings figures are expected to be in the spotlight on November 7. Revenues, inflows of new money, costs, and net profit will be the metrics by which many measure how the integration with Credit Suisse is going.

The number of significant extraordinary items booked in the first half has also led many to assume that much has since been cleared out of the way. All in all, it was likely the usual kitchen sinking exercise to set a clean slate before really getting down to work.

What is almost certain to be a matter of sharper focus are the inflows of net new money in September. The figures are not expected to be that surprising given that UBS previously communicated the trends it was seeing in the first two months of the quarter at the end of August. At the time, it had recorded about $8 billion in inflows in the new, combined Global Wealth Management (GWM) business.

Iqbal Khan, as the head of the business, has a clear recipe for growth. In meeting employees working in various regions around the world, he reduced everything to three words: NNM, or Net New Money.

According to Jefferies analyst Flora Bocahut, the bank needs to report a positive attributable net profit result together with declining risk-weighted asset (RWA) levels in order to achieve its targeted return on common equity Tier 1 levels. In the second quarter, RWAs fell by about $9 billion.

Michael Klien is also focusing on attributable net profit, saying it will be an important figure. UBS is expected to break even in the quarter while seeing a return to profitability in the second half. According to him, the analyst consensus is currently too low.

UBS can curry favor if it manages to cut risk-weighted assets quickly. The focus here will be on non-core and legacy businesses, mainly in Credit Suisse, headed by Beatriz Martin Jimenez. By 2026, the level of capital consumption in that business is expected to fall significantly.

The investment bank is not expected to have a stellar quarter, particularly given the performance seen at the major US institutions. The Swiss business, however, could turn out to be a bright spot.

Many will pay intense attention to costs. The numbers in the second half didn’t much impress investors. It is expected that job cuts and integration costs, particularly at Credit Suisse’s investment bank, will have an impact.

That should also be reflected in headcount numbers globally. At the end of August, they were down by about 8,000, a number that includes both voluntary and involuntary departures.

UBS is in the middle of an arduous integration process and job cuts, costs and further risk mitigation measures are likely to remain overarching themes in the next few quarters.

The integration of Credit Suisse resulted in its business performance disclosures being consolidated and simplified, making it extremely difficult to make comparisons with previous quarters and years. However, starting in the third quarter they are expected to be included in the UBS divisional numbers (GWM, Personal & Corporate Banking (the Swiss business), Asset Management, and Investment Bank. Credit Suisse’s so-called bad bank will be reported in the abovementioned non-core and legacy business.

It is questionable right now whether the quarterly numbers will help lift the bank’s share price. They have risen as high as  23.80 francs recently and currently, trade in the region of 21.70 francs.

The reorganization of UBS investment banking is proceeding. It’s eliminated some duplicate US staffing, but the big cutback is looming.

According to a Bloomberg report, UBS has eliminated about a dozen investment banking jobs in the US in connection with the integration of Credit Suisse. The bank declined to comment to the news outlet on the matter.

According to the sources who asked not to be named, many of the affected positions are in overlapping areas. No names were given.

If the report is true, the reorganization of traditional investment banking with corporate advisory and capital market transactions is proceeding. UBS is trying to combine the best of both banking worlds, but when it comes to Credit Suisse trading, UBS will show little mercy and will wind up the unit.

At the same time, numerous UBS investment bankers in New York are about to move, with the entire team decamping to the former Credit Suisse offices at 11 Madison Avenue.