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UBS completes Credit Suisse takeover to become wealth management behemoth

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Reporting by Noele Illien; Additional reporting by John O'Donnell and John Revill; Editing by Miranda Murray, Tomasz Janowski, Edwina Gibbs, Sharon Singleton, Elisa Martinuzzi and Alexander Smith

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UBS reports first quarterly profit since Credit Suisse takeover

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Owen Walker , European Banking Correspondent

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UBS has reported its first quarterly profit since taking over Credit Suisse, sending its shares up 10 per cent on Tuesday, as the Swiss lender begins to reap the benefits of the contentious rescue of its former rival.

Higher revenues at its wealth management business and investment bank, as well as one-off gains, drove net profits to $1.8bn in the first three months of the year, triple the sum analysts had forecast.

Its wealth management business was again a powerhouse, attracting $27bn in net new assets as clients returned after pulling money from both UBS and Credit Suisse amid the turmoil triggered by the rescue.

Revenues at the division climbed 11 per cent from the previous quarter to $6.1bn. Echoing the performance of many rivals, its investment bank enjoyed a better quarter as revenues rose 16 per cent to $2.8bn. Overall revenues increased 15 per cent to $12.7bn.

Sergio Ermotti, who was parachuted in for a second stint as chief executive to oversee the takeover, said the bank was on course to meet its 2024 capital return targets, having promised to buy back $1bn of shares this year.

The Swiss executive, however, hit out at proposals from the Swiss finance department that would significantly increase the group’s capital requirements. Swiss finance minister Karin Keller-Sutter has suggested this could lead to $15bn-$25bn of additional capital for UBS.

Ermotti told analysts on Tuesday that UBS had not been consulted on the proposals and had no idea what the hit would be for the bank.

“While some modifications to the regulatory regime may be necessary — and we have endorsed many — the discussion around capital should be based on facts,” he said. “That includes a full and transparent account of what led to the idiosyncratic failure of Credit Suisse.”

The prospect of bigger capital requirements has knocked UBS shares over the past month, but they erased much of that loss on Tuesday. The stock was up 10 per cent at SFr27.32 and has climbed 56 per cent over the past year.

UBS also surprised analysts with the speed at which it was running down unwanted parts of Credit Suisse’s investment bank and loan portfolio, resulting in a lower than expected projected loss from the so-called bad bank division of $2.5bn this year, down from a previous expectation of $4bn.

“Overall an impressive set of results . . . albeit the acknowledgment that [non-core] gains are unlikely to [be repeated] and reiteration of existing cost targets . . . seems to suggest the magnitude of today’s share price move is overdone,” said Citi analyst Andrew Coombs.

UBS executives have warned of a bruising and lengthy integration process, with Ermotti saying that this year would be “pivotal”.

During the first quarter, UBS trimmed expenses by 5.5 per cent. It generated an additional $1bn in cost savings, having eliminated $5bn last year. UBS has said it aims to reduce costs by $13bn by the end of 2026, with a further $1.5bn of savings over the course of 2024.

Chief financial officer Todd Tuckner told analysts on Tuesday that the bank had eliminated 2,000 jobs in the first quarter, meaning the combined bank’s headcount had shrunk by 19,000 since the takeover.

While UBS agreed to buy Credit Suisse in March 2023, the deal was not completed until last June.

UBS reported $78bn of common equity tier one capital on Tuesday. The bank’s CET1 ratio, which compares its core capital with its risk-weighted assets and indicates its financial resilience, was 14.8 per cent, well above regulatory minimums.

“This quarter marks the return to reported net profits and further capital accretion — a testament to the strength of our business and client franchises and our ability to deliver significant progress on our integration plans while actively optimising our financial resources,” said Ermotti.

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International Edition

UBS earnings hit $1.8 billion as Credit Suisse acquisition starts to pay off

UBS Group AG returned to profit after two loss-making quarters, with both wealth management and the investment bank adding to sustained progress in the integration of Credit Suisse after its emergency rescue last year. 

The Zurich-based bank said net income in the first quarter was $1.8 billion, compared with analysts estimates of $598 million. The key wealth management unit saw net new assets come in better than expected at $27 billion, while the combined investment bank reported an upbeat performance in the US that helped return the first profit since the takeover.

UBS surged after the release, up 8.1% as of 09:40 a.m. in Zurich.

With the bank targeting the completion of the legal merger with Credit Suisse by May 31, a robust set of results will buttress UBS Chief Executive Officer Sergio Ermotti as he grapples with a tightening regulatory outlook. The Swiss government last month proposed an increase in the capital levels that UBS is required to maintain that could run to around $20 billion. 

Given that the implementation of the new rules is likely to come in 2026 at the earliest, Ermotti signaled that UBS intends to return about $2 billion to investors over the next two years. 

“We also see good momentum with clients, with inflows across our businesses, and our capital is strong, so allowing us to continue to pursue our capital return plans,” Ermotti said in an interview with Bloomberg Television’s Francine Lacqua on Tuesday. 

A big boost to the performance came from a continued revaluation of the assets and liabilities UBS bought as part of the Credit Suisse takeover last year. The bank also booked a $272 million gain in the unit dedicated to winding down Credit Suisse businesses, related to the sale of assets to Apollo Global Management Inc. 

Excluding such effects, “the key operating divisions only mildly outperformed,” analysts at KBW including Thomas Hallett wrote in a note. “This being said, we do not envisage any major declines to group earnings which have been a key theme in the previous quarters.”

In its outlook, UBS signaled that the turning central-bank rate environment is beginning to impact earnings from lending. Partly as a result, the bank expects net interest income declines in wealth management and personal and corporate banking.

On the integration, UBS said it had realized about $1 billion in cost savings in the first quarter and was targeting another $1.5 billion by the end of 2024. 

Revenue in the wealth management unit rose to a reported $6.1 billion in the quarter, from $5.6 billion at the end of December. The bank said that the Americas, Switzerland and Asia-Pacific in particular drove the result. 

UBS’s investment bank posted before-tax profit of about $555 million, compared with analyst estimates for $398 million. Revenue at the investment bank’s unit that houses advisory as well as debt and equity capital markets services rose 52% from a year earlier. In asset management, before-tax profit came in at $111 million, below estimates. 

Capital Plans

The Swiss Federal Council wants systemically-important banks to hold significantly more capital against their foreign units to protect against future risks. UBS faces a capital hit that could reach about $20 billion if the reforms come into effect. The proposals are designed to make the country’s banking sector safer and address a weakness that helped accelerate Credit Suisse’s demise last year.

UBS executives have spoken out against the need for more capital. UBS Chairman Colm Kelleher said last month that the proposal is the “wrong remedy” to the failure of Credit Suisse, adding the lender is “seriously concerned” about some of the discussions around additional buffers.

The bank said its CET1 ratio, a measure of capital strength, was 14.8% at the end of the quarter. Ermotti said that it’s too early to discuss in detail the impact of the new rules. 

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Ubs announces second-quarter 2023 earnings and decision to integrate credit suisse (schweiz) ag (ad hoc announcement pursuant to article 53 of the six exchange regulation listing rules).

ZURICH, August 31, 2023 --( BUSINESS WIRE )--

UBS: (NYSE:UBS) (SWX:UBSN):

UBS’s 2Q23 results materials are available at ubs.com/investors – The audio webcast of the earnings call starts at 08:30 CEST, 31 August 2023.

A definition of each alternative performance measure, the method used to calculate it and the information content are presented under "Alternative performance measures" in the appendix to our 2Q23 report.

The reconciliation of reported and underlying performance is presented in the appendix of our 2Q23 results presentation.

Information in this news release is presented for UBS Group AG on a consolidated basis unless otherwise specified.

Update on CS acquisition and priorities for 2023

On 12 June 2023, we successfully closed the acquisition of Credit Suisse Group AG. Since then, we have started to implement our target operating model, which includes leadership appointments up to three levels below the Group Executive Board. We have also stabilized Credit Suisse’s Wealth Management and Swiss Bank, defined the Non-core and Legacy perimeter and reduced its risk-weighted assets by USD 8bn during the second quarter, we have repaid liquidity support to the Swiss National Bank and voluntarily terminated the Public Liquidity Backstop and Loss Protection Agreement. Today, 31 August 2023, we have announced our decision to fully integrate Credit Suisse’s Swiss Bank.

Credit Suisse (Schweiz) AG to be fully integrated

"Our decision on Credit Suisse (Schweiz) AG follows a thorough evaluation of all available options. Our analysis clearly shows that full integration is the best outcome for UBS, our stakeholders and the Swiss economy. Clients will continue to receive the premium level of service they expect, benefiting from enhanced offerings, expert capabilities and global reach. Our stronger capital base will enable us to keep the combined lending exposures unchanged, while maintaining our risk discipline. Aware of the important role both firms play in our communities, we will maintain all agreed sponsorship of civic, sporting and cultural activities in Switzerland at least until the end of 2025."

Sergio P. Ermotti, Group CEO

The full integration will reinforce the strengths that make UBS the leading bank in Switzerland. Clients will benefit from an enhanced product offering and unique global capabilities enabled by the combination of both businesses. Together, we will be able to offer a broader investment platform. Our capital and financial strength allows us to continue to serve and finance all our clients without compromising on our risk capacity and standards. Competition in the Swiss market remains robust across all our business activities. The cantonal banks in aggregate will continue to have the highest market shares in all relevant personal and commercial banking products. After the merger our branch network will be the third biggest in Switzerland.

UBS and Credit Suisse’s Swiss Bank will operate separately until their planned legal merger in 2024. The Credit Suisse brand and operations will remain in place until we complete the migration of clients to our system, which we expect in 2025.

"Our goal is to make the transition for clients as smooth as possible. 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. Nothing will therefore change for clients in the foreseeable future. As we progress the integration, we remain fully committed to our personal, private, institutional and corporate clients."

Continued stabilization of Credit Suisse franchise

Since the close in June, we engaged with clients across the businesses and saw their confidence returning, as evidenced by positive trends in deposit flows which have carried into July and August. For the second quarter, net inflows into deposits for the combined group were USD 23bn, of which USD 18bn from Credit Suisse’s Wealth Management and Swiss Bank. While asset outflows from Credit Suisse’s Wealth Management division continued in the second quarter, they did so at a slower pace compared to previous quarters and turned positive in June.

Across UBS’s asset gathering businesses, we continued to see strong momentum in the second quarter. UBS Global Wealth Management saw net new money (NNM) inflows of USD 16bn, the highest second-quarter inflows in over a decade, and Asset Management NNM was USD 17bn (or USD 19.5bn excl. money market and associates).

Throughout July and August 2023 we recorded further USD 8bn NNM inflows in the combined wealth management businesses.

Non-strategic assets and businesses to be exited through Non-Core and Legacy

We have created a Non-core and Legacy (NCL) business division, which will include Credit Suisse positions and businesses not aligned with our strategy and policies, such as the assets and liabilities of the Capital Release Unit (Credit Suisse) and the majority of assets and liabilities of the Investment Bank (Credit Suisse), Wealth Management (Credit Suisse) and Asset Management (Credit Suisse), as well as the remaining assets and liabilities of UBS’s NCL portfolio and smaller amounts of assets and liabilities of UBS business divisions that we have assessed as not strategic in light of the acquisition of the Credit Suisse Group. As of 30 June 2023, the positions that will be included in NCL represented approximately USD 55bn of risk-weighted assets (RWA), excluding operational risk RWA, and USD 224bn of leverage ratio denominator (LRD). About half of these RWA are expected to run off by the end of 2026. We intend to actively reduce the assets of the NCL unit in order to reduce operating costs and financial resource consumption, and to enable us to simplify infrastructure.

Aim to achieve gross exit-rate cost saving greater than USD 10bn by end-2026

We aim to substantially complete the integration by the end of 2026. We further aim to achieve gross cost reductions of over USD 10bn by that time. Cumulative integration-related expenses are expected to be broadly offset by accretion-to-par effects of approximately USD 12bn related to fair value adjustments applied to amortized-cost financial instruments.

As part of the integration we plan to simplify our legal structure, including the merger of UBS AG and Credit Suisse AG planned for 2024.

Based on these plans, and excluding integration-related expenses and accretion-to-par effects, we aim to achieve an exit rate cost income ratio of less than 70% by the end of 2026, and to progress toward a 2026 exit rate return on CET1 capital of around 15%.

We expect 3Q23 underlying PBT for UBS Group to be at around breakeven, and to deliver positive underlying PBT in 2H23, supported by various levers, including revenue stabilization, cost saves and lower funding costs.

Future reporting and disclosures

Beginning with the third quarter of 2023, we will report five business divisions – Global Wealth Management, Personal and Corporate Banking, Asset Management, Investment Bank, and Non-core and Legacy and to separately report Group Items.

We will provide further updates with our third quarter results and a more extensive strategic update at our fourth quarter and full year earnings.

2Q23 Group performance

Consolidated financials for 2Q23 and 1H23 include results for the former Credit Suisse business from 1 June 2023

2Q23 PBT was USD 29,239m, including USD 28,925m of negative goodwill and USD 830m integration-related expenses and acquisition costs. Net credit loss expenses were USD 740m. The cost/income ratio was 88.9%. Net profit attributable to shareholders was USD 28,875m, with diluted earnings per share of USD 8.99. Return on CET1 capital was 185.0%.

Credit Suisse sub-group loss before tax for the month of June was USD 1,209m, including net credit loss expenses of USD 724m and integration-related expenses and acquisition costs of USD 374m. For information on the 2Q23 operating performance of Credit Suisse AG consolidated on a US GAAP basis in CHF, please refer to https://www.credit-suisse.com/about-us/en/media-news/media-releases.html .

Excluding negative goodwill, integration-related expenses and acquisition costs, 2Q23 PBT was USD 1,144m, with a cost/income ratio of 80.3% and a return on CET1 capital of 4.5%.

Balance sheet for all seasons

For over a decade we have built and strengthened our culture based on capital strength, efficiency, and prudent risk management. Our balance sheet for all seasons is the foundation of the execution of our strategy. In the second quarter, our capital ratios were consistent with our guidance, and our liquidity position was strong and well above regulatory requirements. The quarter-end CET1 capital ratio was 14.4% and the CET1 leverage ratio was 4.8%, both in excess of our current guidance of ~14% and >4.0%, respectively. We also maintained healthy liquidity buffers with an LCR of 175% and an NSFR of 118%.

Amid relatively robust economic growth data, and despite signs of abating inflation and decreasing wage pressures, central banks have continued to raise interest rates. Although improving, the outlook for economic growth, asset valuations and market volatility remains highly uncertain and difficult to predict. The effects of central bank tightening may also have an impact on market liquidity. Ongoing geopolitical tensions and the Russia–Ukraine war continue to add uncertainty to the macroeconomic outlook. Against this backdrop, we are still expecting clients to continue to diversify cash holdings by investing their deposits into higher-yielding products, although at a slower pace.

While major developments in the macroeconomic and geopolitical picture would impact our business in the short term, we currently see a pick-up in both client sentiment and transactional momentum among our Wealth Management clients.

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.

Our first priority is to stay close to clients and help them manage the challenges and opportunities this uncertain environment presents, while we continue to execute on our strategy and integration plans and continue to pursue growth opportunities.

Second quarter 2023 performance overview – Group

Group PBT USD 29,239m

PBT was USD 29,239m, primarily reflecting a USD 28,925m negative goodwill on the acquisition of Credit Suisse Group and including net credit loss expenses of USD 740m. The cost/income ratio was 88.9% and excluding negative goodwill, integration-related expenses and acquisition costs, the cost/income ratio was 80.3%. Net profit attributable to shareholders was USD 28,875m, with diluted earnings per share of USD 8.99. Return on CET1 capital was 185.0% or 4.5% excluding negative goodwill, integration-related expenses and acquisition costs.

Global Wealth Management (GWM) PBT USD 1,110m, -4% YoY

Total revenues increased 1% YoY to USD 4,736m. Net interest income increased 14%, mainly driven by higher deposit margins, which resulted from rising interest rates, more than offsetting the effects of lower average deposit volumes and lower loan revenues, which reflected lower average loan volumes and margins. Recurring net fee income decreased 3%, mainly reflecting negative market performance, slightly offset by the impact from net new fee-generating assets over the past year, which were primarily in lower-margin products. Transaction-based income decreased 6%, mainly driven by lower levels of client activity particularly in the Americas and Asia Pacific. Net credit loss expenses were USD 5m, compared with net releases of USD 3m in 2Q22. Operating expenses were up 3%, mainly driven by unfavorable foreign currency effects, increases in technology expenses and personnel expenses, and integration-related expenses associated with the acquisition of Credit Suisse Group. These were partly offset by lower provisions for litigation, regulatory and similar matters. The cost/income ratio was 76.5%, up 1.2 percentage points YoY. Fee-generating assets were up 3% sequentially to USD 1,380bn. Net new fee-generating assets 1 were USD 12.6bn. Net new money was USD 16.2bn.

Personal & Corporate Banking (P&C) PBT CHF 612m, +54% YoY

Total revenues increased 24% YoY. Net interest income increased 45%, mainly driven by higher deposit margins, which resulted from rising interest rates, and higher loan revenues, partly offset by lower deposit fees. The second quarter of 2022 included a benefit from the Swiss National Bank deposit exemption. Recurring net fee income increased 5%, partly reflecting higher revenues from account fees. Transaction-based income increased 2%, mainly driven by higher corporate client fees. Net credit loss expenses were CHF 9m, compared with net expenses of CHF 33m in 2Q22. Operating expenses increased 9%, mainly driven by higher technology expenses, accruals for variable compensation, and integration-related expenses associated with the acquisition of Credit Suisse Group. The cost/income ratio was 50.8%, 6.9 percentage points lower YoY.

Asset Management (AM) PBT USD 90m, -91% YoY

Total revenues were down 64% YoY, primarily due to 2Q22 including a gain of USD 848m from the sale of our shareholding in the Mitsubishi Corp.-UBS Realty Inc. joint venture. Excluding that gain, revenues decreased 5%. Net management fees decreased 5%, mainly reflecting negative market performance and pressure on margins from asset shifts. Performance fees decreased by USD 2m, mainly in Hedge Fund Businesses and Equities. Operating expenses decreased 1%, mainly reflecting lower personnel expenses, partly offset by foreign currency effects and increases in technology, control functions and general and administrative expenses. The cost/income ratio was 82.1%. Invested assets increased 4% sequentially to USD 1,188bn. Net new money was USD 17bn (USD 19bn excluding money market flows and associates).

Investment Bank (IB) PBT USD 139m, -66% YoY

Total revenues decreased 10%. Global Markets revenues decreased by USD 197m, or 11%, primarily driven by lower Derivatives & Solutions and Execution Services revenues, partly offset by higher Financing revenues. Global Banking revenues decreased by USD 6m, or 2%, driven by lower Advisory revenues, partly offset by increased Capital Markets revenues. Net credit loss expenses were USD 1m, compared with net releases of USD 28m in 2Q22. Operating expenses increased 2%, mainly driven by higher technology expenses and increases across a number of other expense lines, partly offset by lower provisions for litigation, regulatory and similar matters. The cost/income ratio was 92.6%, 10.8 percentage points higher YoY.

Group Functions PBT USD -495m, compared with USD -324m in 2Q22

Credit Suisse (June 2023) PBT USD -1,209m

UBS’s sustainability approach through the integration

Following the acquisition of Credit Suisse, our ambition is unchanged: to be a global leader in sustainable finance, building on the strong foundation we have developed over many years. We aim to offer solutions to help private and institutional clients meet their investment objectives, including through sustainable finance. In addition, we want to be the provider of choice for clients who wish to mobilize capital toward the achievement of the United Nations 17 Sustainable Development Goals and the orderly transition to a low-carbon economy.

Reaching net zero is an ambitious goal, and UBS remains committed to playing our part. We will continue to drive towards our long-term aspiration of net-zero greenhouse gas emissions by 2050. Both UBS and Credit Suisse have previously announced interim targets for the firm’s own operations, financing and discretionary client portfolios. We are currently evaluating the implications of the acquisition of Credit Suisse for these interim targets, given the different shape and activities of the businesses. We are conducting a robust risk analysis, assessing and re-baselining the emissions of the combined firm. An update will be provided in our 2023 Sustainability Report to be published next year.

Information about results materials and the earnings call

UBS’s second quarter 2023 report, news release and slide presentation are available from 06:45 CEST on Thursday, 31 August 2023, at ubs.com/quarterlyreporting .

UBS will hold a presentation of its second quarter 2023 results on Thursday, 31 August 2023. The results will be presented by Sergio P. Ermotti (Group Chief Executive Officer), Todd Tuckner (Group Chief Financial Officer), Sarah Mackey (Head of Investor Relations), and Marsha Askins (Group Head Communications & Branding).

Time 08:30 CEST 07:30 BST 02:30 US EDT

Audio webcast The presentation for analysts can be followed live on ubs.com/quarterlyreporting with a simultaneous slide show.

Webcast playback An audio playback of the results presentation will be made available at ubs.com/investors later in the day.

Cautionary Statement Regarding Forward-Looking Statements

This news release contains statements that constitute "forward-looking statements," including but not limited to management’s outlook for UBS’s financial performance, statements relating to the anticipated effect of transactions and strategic initiatives on UBS’s business and future development and goals or intentions to achieve climate, sustainability and other social objectives. While these forward-looking statements represent UBS’s judgments, expectations and objectives concerning the matters described, a number of risks, uncertainties and other important factors could cause actual developments and results to differ materially from UBS’s expectations. The Russia–Ukraine war continues to affect global markets, exacerbate global inflation, and slow global growth. In addition, the war has caused significant population displacement, and shortages of vital commodities, including energy shortages and food insecurity, and has increased the risk of recession in OECD economies. The coordinated sanctions on Russia and Belarus, and Russian and Belarusian entities and nationals, and the uncertainty as to whether the war will widen and intensify, may continue to have significant adverse effects on the market and macroeconomic conditions, including in ways that cannot be anticipated. UBS’s acquisition of Credit Suisse has materially changed our outlook and strategic direction and introduced new operational challenges. The integration of the Credit Suisse entities into the UBS structure is expected to take between three to five years and presents significant risks, including the risks that UBS Group AG may be unable to achieve the cost reductions and other benefits contemplated by the transaction. This creates significantly greater uncertainty about forward-looking statements. Other factors that may affect our performance and ability to achieve our plans, outlook and other objectives also include, but are not limited to: (i) the degree to which UBS is successful in the execution of its strategic plans, including its cost reduction and efficiency initiatives and its ability to manage its levels of risk-weighted assets (RWA) and leverage ratio denominator (LRD), liquidity coverage ratio and other financial resources, including changes in RWA assets and liabilities arising from higher market volatility and the size of the combined bank; (ii) the degree to which UBS is successful in implementing changes to its businesses to meet changing market, regulatory and other conditions, including as a result of the acquisition of Credit Suisse; (iii) increased inflation and interest rate volatility in major markets; (iv) developments in the macroeconomic climate and in the markets in which UBS operates or to which it is exposed, including movements in securities prices or liquidity, credit spreads, currency exchange rates, deterioration or slow recovery in residential and commercial real estate markets, the effects of economic conditions, including increasing inflationary pressures, market developments, increasing geopolitical tensions, and changes to national trade policies on the financial position or creditworthiness of UBS’s clients and counterparties, as well as on client sentiment and levels of activity, including the COVID-19 pandemic and the measures taken to manage it, which have had and may also continue to have a significant adverse effect on global and regional economic activity, including disruptions to global supply chains and labor market displacements; (v) changes in the availability of capital and funding, including any adverse changes in UBS’s credit spreads and credit ratings of UBS, Credit Suisse, sovereign issuers, structured credit products or credit-related exposures, as well as availability and cost of funding to meet requirements for debt eligible for total loss-absorbing capacity (TLAC), in particular in light of the acquisition of Credit Suisse; (vi) changes in central bank policies or the implementation of financial legislation and regulation in Switzerland, the US, the UK, the European Union and other financial centers that have imposed, or resulted in, or may do so in the future, more stringent or entity-specific capital, TLAC, leverage ratio, net stable funding ratio, liquidity and funding requirements, heightened operational resilience requirements, incremental tax requirements, additional levies, limitations on permitted activities, constraints on remuneration, constraints on transfers of capital and liquidity and sharing of operational costs across the Group or other measures, and the effect these will or would have on UBS’s business activities; (vii) UBS’s ability to successfully implement resolvability and related regulatory requirements and the potential need to make further changes to the legal structure or booking model of UBS in response to legal and regulatory requirements and any additional requirements due to its acquisition of Credit Suisse, or other developments; (viii) UBS’s ability to maintain and improve its systems and controls for complying with sanctions in a timely manner and for the detection and prevention of money laundering to meet evolving regulatory requirements and expectations, in particular in current geopolitical turmoil; (ix) the uncertainty arising from domestic stresses in certain major economies; (x) changes in UBS’s competitive position, including whether differences in regulatory capital and other requirements among the major financial centers adversely affect UBS’s ability to compete in certain lines of business; (xi) changes in the standards of conduct applicable to our businesses that may result from new regulations or new enforcement of existing standards, including measures to impose new and enhanced duties when interacting with customers and in the execution and handling of customer transactions; (xii) the liability to which UBS may be exposed, or possible constraints or sanctions that regulatory authorities might impose on UBS, due to litigation, contractual claims and regulatory investigations, including the potential for disqualification from certain businesses, potentially large fines or monetary penalties, or the loss of licenses or privileges as a result of regulatory or other governmental sanctions, as well as the effect that litigation, regulatory and similar matters have on the operational risk component of our RWA, including as a result of its acquisition of Credit Suisse, as well as the amount of capital available for return to shareholders; (xiii) the effects on UBS’s business, in particular cross-border banking, of sanctions, tax or regulatory developments and of possible changes in UBS’s policies and practices; (xiv) UBS’s ability to retain and attract the employees necessary to generate revenues and to manage, support and control its businesses, which may be affected by competitive factors; (xv) changes in accounting or tax standards or policies, and determinations or interpretations affecting the recognition of gain or loss, the valuation of goodwill, the recognition of deferred tax assets and other matters; (xvi) UBS’s ability to implement new technologies and business methods, including digital services and technologies, and ability to successfully compete with both existing and new financial service providers, some of which may not be regulated to the same extent; (xvii) limitations on the effectiveness of UBS’s internal processes for risk management, risk control, measurement and modeling, and of financial models generally; (xviii) the occurrence of operational failures, such as fraud, misconduct, unauthorized trading, financial crime, cyberattacks, data leakage and systems failures, the risk of which is increased with cyberattack threats from both nation states and non-nation-state actors targeting financial institutions; (xix) restrictions on the ability of UBS Group AG to make payments or distributions, including due to restrictions on the ability of its subsidiaries to make loans or distributions, directly or indirectly, or, in the case of financial difficulties, due to the exercise by FINMA or the regulators of UBS’s operations in other countries of their broad statutory powers in relation to protective measures, restructuring and liquidation proceedings; (xx) the degree to which changes in regulation, capital or legal structure, financial results or other factors may affect UBS’s ability to maintain its stated capital return objective; (xxi) uncertainty over the scope of actions that may be required by UBS, governments and others for UBS to achieve goals relating to climate, environmental and social matters, as well as the evolving nature of underlying science and industry and the possibility of conflict between different governmental standards and regulatory regimes; (xxii) the ability of UBS to access capital markets; (xxiii) the ability of UBS to successfully recover from a disaster or other business continuity problem due to a hurricane, flood, earthquake, terrorist attack, war, conflict (e.g., the Russia–Ukraine war), pandemic, security breach, cyberattack, power loss, telecommunications failure or other natural or man-made event, including the ability to function remotely during long-term disruptions such as the COVID-19 (coronavirus) pandemic; (xxiv) the level of success in the absorption of Credit Suisse, in the integration of the two groups and their businesses, and in the execution of the planned strategy regarding cost reduction and divestment of any non-core assets, the existing assets and liabilities currently existing in the Credit Suisse Group, the level of resulting impairments and write-downs, the effect of the consummation of the integration on the operational results, share price and credit rating of UBS – delays, difficulties, or failure in closing the transaction may cause market disruption and challenges for UBS to maintain business, contractual and operational relationships; and (xxv) the effect that these or other factors or unanticipated events, including media reports and speculations, may have on our reputation and the additional consequences that this may have on our business and performance. The sequence in which the factors above are presented is not indicative of their likelihood of occurrence or the potential magnitude of their consequences. Our business and financial performance could be affected by other factors identified in our past and future filings and reports, including those filed with the US Securities and Exchange Commission (the SEC). More detailed information about those factors is set forth in documents furnished by UBS and filings made by UBS with the SEC, including the Annual Report on Form 20-F for the year ended 31 December 2022. UBS is not under any obligation to (and expressly disclaims any obligation to) update or alter its forward-looking statements, whether as a result of new information, future events, or otherwise.

Numbers presented throughout this news release may not add up precisely to the totals provided in the tables and text. Percentages and percent changes disclosed in text and tables are calculated on the basis of unrounded figures. Absolute changes between reporting periods disclosed in the text, which can be derived from numbers presented in related tables, are calculated on a rounded basis.

Within tables, blank fields generally indicate non-applicability or that presentation of any content would not be meaningful, or that information is not available as of the relevant date or for the relevant period. Zero values generally indicate that the respective figure is zero on an actual or rounded basis. Values that are zero on a rounded basis can be either negative or positive on an actual basis.

UBS Group AG and UBS AG Investor contact Switzerland: +41-44-234 41 00 Americas: +1-212-882 57 34

Media contact Switzerland: +41-44-234 85 00 UK: +44-207-567 47 14 Americas: +1-212-882 58 58 APAC: +852-297-1 82 00 ubs.com

View source version on businesswire.com: https://www.businesswire.com/news/home/20230830237188/en/

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UBS Completes Credit Suisse Acquisition

• Combined entity now operates as consolidated banking group
• Today marks last trading day of Credit Suisse shares on SIX Swiss Exchange
• Shareholders to receive 1 UBS share for every 22.48 Credit Suisse shares
• Board of Directors nominations announced for certain Credit Suisse entities, including Credit Suisse AG
• UBS expects its CET1 capital ratio throughout 2023 to be around 14%

ZURICH, Switzerland --(BUSINESS WIRE)-- Regulatory News :

Ad hoc announcement pursuant to Article 53 of the SIX Exchange Regulation Listing Rules

UBS (NYSE:UBS) (SWX:UBSN) has completed the acquisition of Credit Suisse today, crossing an important milestone. Credit Suisse Group AG has been merged into UBS Group AG and the combined entity will operate as a consolidated banking group.

Today marks the last trading day of Credit Suisse Group AG shares on the SIX Swiss Exchange . Credit Suisse Group AG ADS will no longer be traded on the New York Stock Exchange . As announced on 19 March 2023 , Credit Suisse shareholders will receive 1 UBS share for every 22.48 Credit Suisse shares held.

As previously announced, UBS will operate the following governance model pending further integration:

• UBS Group AG will manage two separate parent banks – UBS AG and Credit Suisse AG. Each institution will continue to have its own subsidiaries and branches, serve its clients and deal with counterparties.
• The Board of Directors and Group Executive Board of UBS Group AG will hold overall responsibility for the consolidated group.

As it completes the acquisition, UBS announces Board of Director nominations for certain Credit Suisse entities. Subject to regulatory approval, the Credit Suisse AG Board will consist of Lukas Gähwiler (Chair), Jeremy Anderson (Vice-Chair), Christian Gellerstad (Vice-Chair), Michelle Bereaux , Mirko Bianchi (until 30 June 2023 ), Clare Brady , Mark Hughes , Amanda Norton and Stefan Seiler .

Colm Kelleher , UBS Group AG Chairman, said: “I‘m pleased that we’ve successfully closed this crucial transaction in less than three months, bringing together two global systemically important banks for the first time. We are now one Swiss global firm and, together, we are stronger. As we start to operate the consolidated banking group, we’ll continue to be guided by the best interests of all our stakeholders, including investors. Our top priority remains the same: to serve our clients with excellence.”

Sergio P. Ermotti , CEO of UBS Group AG , added: “Today we welcome our new colleagues from Credit Suisse to UBS . Instead of competing, we’ll now unite as we embark on the next chapter of our joint journey. Together, we’ll present our clients an enhanced global offering, broader geographic reach and access to even greater expertise. We’ll create a bank that our clients, employees, investors and Switzerland can be proud of.”

UBS expects its CET1 capital ratio to be around 14% in the second quarter of 2023 and to remain around that level throughout 2023. It anticipates that Credit Suisse’s operating losses and significant restructuring charges will be offset by reductions in RWA.

In the future, UBS will report consolidated financial results for the combined group under IFRS in USD. The second-quarter 2023 earnings will be communicated on 31 August 2023 .

The presentation summarizing the pro forma financial information contained in the F-4 registration statement has been updated to reflect the latest and final amendment to the registration statement.

This document and the information contained herein are provided solely for information purposes, and are not to be construed as a solicitation of an offer to buy or sell any securities or other financial instruments in Switzerland , the United States or any other jurisdiction. No investment decision relating to securities of or relating to UBS Group AG , UBS AG or their affiliates should be made on the basis of this document. UBS undertakes no obligation to update the information contained herein.

This document contains statements that constitute “forward-looking statements.” While these forward-looking statements represent UBS’s judgments and expectations concerning the matters described, a number of risks, uncertainties and other important factors could cause actual developments and results to differ materially. For a discussion of the risks and uncertainties that may affect UBS’s future results please refer to the “Risk Factors” and other sections of UBS’s most recent Annual Report on Form 20-F, quarterly reports and other information furnished to or filed with the US Securities and Exchange Commission on Form 6-K. UBS’s Annual Report on Form 20-F, quarterly reports and other information furnished to or filed with the US Securities and Exchange Commission on Form 6-K are also available at the SEC’s website: www.sec.gov .

View source version on businesswire.com : https://www.businesswire.com/news/home/20230612031118/en/

UBS Group AG

Investor Relations: Switzerland : +41-44-234 41 00

Media Relations: Switzerland : +41-44-234 85 00 UK : +44-207-567 47 14 Americas : +1-212-882 58 58 APAC: +852-297-1 82 00

www.ubs.com/media

Source: UBS Group AG

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UBS Closes Credit Suisse Acquisition

By Pierre Bertrand

UBS Group completed its acquisition of Credit Suisse on Monday, creating one of the world's largest banks by assets and drawing to a close the monthslong rescue operation of the Swiss peer which began in March.

UBS said Monday marks the last trading day of Credit Suisse shares on the SIX Swiss Exchange and that its American Depositary Shares will no longer be traded on the New York Stock Exchange.

UBS, which has been assessing how best to integrate Credit Suisse, will now have to choose what parts of the previously troubled lender it wants to hold on to. On Friday, UBS signed a loss-protection agreement with the Swiss government in regards to potential losses on designated non-core Credit Suisse assets.

Speaking to analysts after the bank published its first-quarter earnings in late April, UBS boss Sergio Ermotti said that he didn't feel as if the combined businesses would be too large for Switzerland.

He added, however, that non-core Credit Suisse activities outside UBS's strategic focus and risk appetite would be wound down.

UBS also said at the time that it intended to reduce the risk and resource consumption of Credit Suisse's investment banking business and that it plans for the combined investment bank to account for around 25% of the group's risk-weighted assets.

Credit Suisse shareholders have received one UBS share for every 22.48 outstanding shares held and UBS has now assumed all of Credit Suisse's assets and liabilities, UBS said. When the deal was disclosed on March 19, the parties said this amounted to a price of 3 billion Swiss francs ($3.32 billion).

Write to Pierre Bertrand at [email protected]

(END) Dow Jones Newswires

June 12, 2023 03:44 ET (07:44 GMT)

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UBS Shares Soar as Smashes Profit Forecast, Sticks to Share Buybacks

FILE PHOTO: Logos of Swiss banks Credit Suisse and UBS are seen before a news conference in Zurich Switzerland, August 30, 2023. REUTERS/Denis Balibouse/File Photo

By Noele Illien

ZURICH (Reuters) -UBS stunned investors with a $1.8 billion first-quarter profit on Tuesday, saying it was sticking with share buybacks, easing concerns about Swiss plans to hike capital requirements.

Shares in Switzerland's biggest bank jumped as much as 10% and were on track for their biggest one-day gain since March 2023, when authorities orchestrated its rescue of Credit Suisse.

UBS has seen its shares soar more than 50% since the takeover, with investors upbeat about the prospects for the combined group given low acquisition costs, a huge increase in assets and its so far relatively smooth integration.

The bank's net income was nearly triple analyst forecasts, marking its first quarterly profit since taking over Credit Suisse and driven by cost-cutting and a boost from 'non-core' parts of the business that UBS inherited and wants to exit.

"This is a testament to the strength of our client franchises and progress on our integration plans," UBS CEO Sergio Ermotti said.

UBS now faces a pivotal year for integrating its former rival, with trickier stages such as combining IT systems, migrating clients from Credit Suisse and cutting the enlarged banks' workforce of 111,549 all still to come.

Planned job cuts in Switzerland are expected to kick off towards the end of 2024 and continue through 2026, Ermotti said.

UBS faces growing regulatory and political scrutiny, as Switzerland seeks ways to protect itself better should a bank with a balance sheet double the size of its economy ever fail.

The Swiss government recently unveiled plans to raise capital requirements for banks deemed "too big to fail", fuelling concerns about whether they would impact the ability of UBS to reward shareholders.

Executives have expressed major concerns, but Ermotti said on Tuesday that UBS was sticking with share buyback plans for 2024, 2025 and 2026.

This includes repurchasing up to $1 billion this year as well as increasing last year's dividend of $0.70 per share by a mid-teen percentage in 2024.

Record buybacks and dividends have helped fuel a Europe-wide rally in banking shares, with stocks hitting a near nine-year high as the latest forecast-beating bank earnings, including from UniCredit, was cheered by investors.

Ermotti said UBS was beefing up its regulatory reserves by around $20 billion irrespective of the Swiss government's plans.

"We expect UBS to accelerate the winding down of the legacy Credit Suisse trading positions, which should release substantial capital that we believe would be more than sufficient for the mooted regulatory capital increase," said Johann Scholtz, analyst at Morningstar.

NET NEW ASSETS

Pre-provision profits in UBS' core businesses were 10% above expectations, while asset management and investment banking fell revenues short of forecasts, RBC analysts said.

Wealth management reported $27 billion in net new assets, compared to $22 billion for the previous quarter, although UBS said lower lending and deposit volumes as well as lower Swiss interest rates could hit the division.

UBS said that it had achieved an additional $1 billion in gross cost savings in the first quarter, taking total savings since the merger to $5 billion. It is aiming for another $1.5 billion in savings by the end of 2024.

The historic deal to merge the two global systemically important banks closed last June and was followed by two quarters of losses for UBS. The merger of the main parent companies is expected to be legally completed on May 31, and the merger of their Swiss branches in the third quarter.

(Reporting by Noele Illien; Additional reporting by Tommy Reggiori Wilkes in London; Editing by Edwina Gibbs and Alexander Smith)

Copyright 2024 Thomson Reuters .

Tags: Switzerland , Europe

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Please refer also to the UBS Group AG financial reports at  Quarterly reporting  for selected financial and regulatory key figures for our significant regulated subsidiaries and sub-groups. In addition, please refer to  Pillar 3 disclosures  for additional Pillar 3 information published for our significant regulated subsidiaries and sub-groups.

• 31 March 2024 Pillar 3 Report – UBS Group and significant regulated subsidiaries and sub-groups
• 31 March 2024 UBS Group Report – Financial and regulatory key figures
• 31 December 2023 Pillar 3 Report – UBS Group and significant regulated subsidiaries and sub-groups
• 31 December 2023 UBS Group Annual Report – Financial and regulatory key figures
• 30 September 2023 Pillar 3 Report – UBS Group and significant regulated subsidiaries and sub-groups
• 30 September 2023 UBS Group Report – Financial and regulatory key figures
• 30 June 2023 Pillar 3 Report – UBS Group and significant regulated subsidiaries and sub-groups
• 30 June 2023 UBS Group Report – Financial and regulatory key figures

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• AGRICULTURE

UBS CEO says Switzerland should not “overshoot” with capital demands

By Elisa Martinuzzi

ZURICH (Reuters) -UBS CEO Sergio Ermotti said on Monday that criticism that the bank had become too big for Switzerland and that it needed to set aside more capital were misplaced.

Ermotti, who was brought back to UBS last year to lead the process of absorbing Credit Suisse after an emergency rescue, said he agreed with most of the government’s recent proposals to make Swiss banking safer but not plans to make UBS hold more capital.

“When you talk about the only areas where we believe it’s appropriate not to overshoot is the areas around capital,” he told Reuters in an interview in Zurich.

He said that through its acquisition of Credit Suisse, UBS was already having to put aside $20 billion extra in capital.

UBS will reinvest part of $13 billion in planned cost savings on making the bank’s processes and businesses stronger following the takeover of Credit Suisse, Ermotti also said.

UBS has seen its shares soar since the takeover, with investors upbeat about the prospects for the combined group given low acquisition costs, a huge increase in assets and its so far relatively smooth integration.

($1 = 0.9268 euros)

(Reporting by Elisa Martinuzzi and Noele Illien, Editing by Louise Heavens)

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UBS profits surge after rescuing rival bank

Forecast-beating profits from UBS as it swallows up fallen rival Credit Suisse and a pledge to stick with a plan to return $2 billion to investors through stock buybacks sent shares in Switzerland’s biggest bank soaring.

Net profits at the lender surged to $1.8 billion in the three months to the end of March, beating the $1 billion it reported a year earlier and far surpassing the roughly $600 million that had been forecast by analysts.

The better-than-expected figures will bolster investor confidence in UBS as it navigates the complex task of integrating Credit Suisse, which it bought at a knock-down price of SwFr3 billion (£2.6 billion) last year in a rescue orchestrated by the Swiss authorities.

Credit Suisse, which was the country’s second-largest lender, was on the brink of collapse when UBS was forced to acquire it to avert a financial crisis. The deal has left UBS in an even more dominant position in Switzerland, although bosses at the group must pull off one of the most complicated mergers attempted by a bank since the 2007-9 financial crisis, requiring tens of thousands of job cuts, to reap the full benefits of the takeover.

Sergio Ermotti , the UBS chief executive, described the lender’s first-quarter results as “a testament to the strength of our business and client franchises and our ability to deliver significant progress on our integration plans”.

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He said: “A little over a year ago, we were asked to play a critical role in stabilising the Swiss and global financial systems through the acquisition of Credit Suisse, and we are delivering on our commitments.”

UBS has grown as a result of the takeover and now has assets of $1.7 trillion, roughly twice the size of Switzerland’s gross domestic product, fuelling concerns that it has become “too big to fail”.

To guard against a future banking meltdown the Swiss government last month set out plans to tighten the rules on its biggest lenders, including by increasing the capital requirements on UBS to bolster its ability to withstand a crisis.

This raised concerns among investors that more stringent capital rules would force UBS to pare back a plan it unveiled a month ago to return $2 billion of capital to stock market investors over two years through share buybacks, including $1 billion of repurchases in 2024.

Yet Ermotti reassured investors by saying the bank was not changing its buyback plans and UBS stock briefly climbed back to the level it traded at before the government announced its clampdown on big lenders . It ended the day up SwFr1.89, or 7.6 per cent, at SwFr26.79.

The group’s first-quarter figures were boosted by its powerhouse wealth management division, which attracted $27 billion of net new assets in the period, and its investment banking arm.

However, the biggest driver of the outperformance came from a gain in the non-core operations it acquired when it rescued Credit Suisse and which UBS is exiting. Analysts at Keefe, Bruyette & Woods, a stockbroker, said: “Excluding this, the key operating divisions only mildly outperformed.”

Initiatives to cut costs following the Credit Suisse takeover generated $1 billion of savings in the quarter, with UBS now having achieved $5 billion in gross efficiencies since the deal. It is targeting another $1.5 billion of savings by the end of this year.

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• FROM AFP NEWS

UBS Back In Profit After Credit Suisse Takeover Losses

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Swiss banking giant UBS on Tuesday said first quarter net profit rose 71 percent to nearly $1.8 billion, far exceeding expectations, after two quarters in the red due to the mammoth takeover of Credit Suisse.

Switzerland's biggest bank said its turnover increased by 46 percent to $12.7 billion, largely thanks to its investment banking arm, which had been the key part in the mega-merger.

UBS shares soared on the Swiss stock exchange, rising more than nine percent at 27.20 Swiss francs each in midday trading.

UBS's investment banking revenues increased by 16 percent, driven by a more favourable market climate and by the good performance of IPOs and mergers and acquisitions.

In March 2023, Swiss authorities strongarmed UBS into the $3.25-billion takeover to prevent Credit Suisse from going under with catastrophic consequences for the global financial system.

The results for the first three months of 2024 were a moment for the bank to review progress since the integration of Credit Suisse.

"A little over a year ago, we were asked to play a critical role in stabilising the Swiss and global financial systems through the acquisition of Credit Suisse and we are delivering on our commitments," said UBS chief executive Sergio Ermotti.

"This quarter marks the return to reported net profits and further capital accretion -- a testament to the strength of our business and client franchises and our ability to deliver significant progress on our integration plans while actively optimising our financial resources."

UBS posted a $785 million loss in the third quarter of 2023, and was down $279 million in the fourth quarter.

Many analysts expected UBS's results to return to positive territory following the 2024 first quarter figures published by US banks in the same league.

Analysts surveyed by the Swiss financial newswire AWP had on average expected UBS to post a net profit of $637 million.

But Switzerland's leading bank far exceeded expectations, with Swiss investment managers Vontobel describing the results as "massively above estimates".

UBS continued its cost reductions, making $1 billion in additional savings during the first quarter, with the cumulative figure since the merger amounting to $5 billion, or nearly 40 percent of the $13 billion target for 2026.

By the end of the year, the group hopes to achieve another $1.5 billion in savings.

Analysts with the Zurich Cantonal Bank said the results showed that in an improved environment, UBS could both increase revenues and reduce costs.

"The bank therefore still appears to be on track to implement the integration of Credit Suisse in line with the target plan," ZKB said.

Though Tuesday's first quarter figures were better than expected, investors are watching to see how UBS deals with looming tighter regulation for Switzerland's banking sector.

The merger of the two largest banks in the country created a megabank of troubling size in relation to the Swiss economy.

The Swiss government last month unveiled a project aimed at toughening the rules on banks, regarding both bonuses and the capital they must set aside to be able to face a crisis.

According to calculations by some experts, UBS may need to build an additional liquidity cushion of $15 billion to $25 billion -- figures that Finance Minister Karin Keller-Sutter told a newspaper were plausible.

Ermotti told a conference with analysts it was "an important discussion for the country", but while hoping for a reasonable outcome it was still "too early to speculate on the impact" the changes might have.

In the 12 months following the Credit Suisse takeover, UBS shares gained 59 percent on the stock market.

However, since April, shares have fallen back as investors worry about the additional amounts that the bank will have to put to one side.

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UBS reports first profit since taking over Credit Suisse

By Noele Illien

ZURICH (Reuters) -UBS reported net income of $1.8 billion for January-March, its first quarterly profit since it took over fallen rival Credit Suisse.

The net income attributable to shareholders for Switzerland's largest bank was better than a company-provided consensus estimate of $602 million and compares with a profit of $1 billion in the same period a year earlier.

UBS also said on Tuesday that it had achieved an additional $1 billion in gross cost savings in the first quarter, taking total savings to $5 billion. It is aiming to achieve another $1.5 billion in savings by the end of the year.

The group's wealth management arm reported $27 billion in net new assets for the first quarter of the year, compared to $22 billion for the three months prior.

But UBS flagged that lower lending and deposit volumes as well as lower interest rates in Switzerland could impact the bank's wealth management division.

"In the second quarter of 2024, we expect a low-to-mid single-digit decline in net interest income in Global Wealth Management," the bank said in a statement.

The first merger of two global systemically important banks - orchestrated by Swiss authorities who feared that scandal-ridden Credit Suisse was on the brink collapse - was completed last June after which UBS posted two consecutive quarters of losses due to the costs of absorbing its rival.

Despite the shot-gun nature of the takeover, investors have been upbeat about UBS's prospects given the low acquisition costs and its huge increase in assets. Shares in the bank have climbed some 40% over the past year.

This year is expected to be a pivotal year for UBS as it tackles some of the trickier stages of integration such as combining separate IT systems and legal entities, as well as migrating clients from Credit Suisse to UBS.

(Reporting by Noele Illien; Editing by Edwina Gibbs)