Aug. 31 (UPI) — Swiss banking giant UBS on Thursday reported an after-tax profit of $29 billion for the April to June quarter, less than six months after taking over its troubled rival Credit Suisse for just $3.2 billion.
The result was only slightly shy of the $28.9 billion negative goodwill the bank booked to reconcile the fact it acquired Credit Suisse’s entire, albeit risky, assets for a fraction of their $238 billion value, the bank’s results show.
Stripping out the negative goodwill and the costs of acquiring Credit Suisse and merging the two banks together, underlying before-tax profit came in at $1.1 billion.
Credit Suisse also posted its own results Thursday, reporting a $10.6 billion net loss for the quarter.
UBS CEO Sergio Ermotti told CNBC he believed people would “clearly understand” the massive negative goodwill was necessary given the costs and risk involved in absorbing and restructuring a bank the size of Credit Suisse at a point when it was no longer viable.
“Two and a half months since closing the acquisition, we are wasting no time in delivering value for all our stakeholders from one of the biggest and most complex bank mergers in history,” Ermotti wrote in the results report.
“We are winning back the trust of clients, reducing costs and taking the necessary actions to create economies of scale that will allow us to better focus our resources and target investments for future growth.”
Ermotti said he expected the group’s underlying before-tax profit for the third quarter to be at around breakeven and to be in the black for the second half overall, supported by revenue stabilization, cost savings and lower funding costs.
The group aimed to achieve gross cost savings of $10 billion by the time integration of the two banks was substantially complete at the end of 2026, added Ermotti.
While retrograde developments in the macroeconomic and geopolitical environment could impact UBS’ business in the short term, Ermotti said the bank was seeing client sentiment and transactional momentum among its wealth management clients picking up.
“We expect positive net new asset flows in our wealth and asset management franchises, and higher asset valuations are also expected to have a positive impact on our recurring net fee income year on year,” he said.
UBS and Credit Suisse’s Swiss Bank will operate separately until their planned legal merger in 2024 with the Credit Suisse brand and operations remaining in place until UBS completes the migration of clients to its systems, which it expects to be in 2025.
