It is probably the last quarterly report of the largest Swiss bank before its integration with Credit Suisse.
(Photo: Reuters)
Zurich Investors only know such negative surprises from Credit Suisse: The profit of the big Swiss bank UBS, which has been used to success, surprisingly more than halved in the first quarter of 2023.
The main reason for this was provisions for litigation amounting to $665 million in connection with US home mortgages, a legal legacy from the financial crisis. This was announced by UBS on Tuesday.
Net income fell to about $1 billion in the first quarter, from $2.1 billion in the same quarter last year. Even without the provisions, profit would have been 21 percent lower. Analysts had expected a surplus of around $1.7 billion.
Revenue fell 7 percent to $8.7 billion. The bank’s operating costs climbed 9 percent to $7.2 billion.
The bank benefited to a large extent from client inflows due to the crisis of confidence at Credit Suisse in March 2022. UBS recorded new money inflows totaling $28 billion in the first quarter.
Of that, $7 billion fell in the last ten days of March, and thus in the period after the announcement of the Credit Suisse takeover. “Our clients turned to us when they were looking for stability,” said UBS CEO Sergio Ermotti.
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This shows “that we continue to be a source of stability for our customers in times of considerable uncertainty,” Ermotti continued. Thanks to its strong balance sheet and profitable business model, UBS could “be part of the solution at a critical moment for the Swiss and global financial system.” UBS took over Credit Suisse on March 19 in a state-mandated bailout.
Customers move billions to UBS
A series of scandals and the uncertainty caused by a banking crisis in the US had brought Credit Suisse to the brink of collapse. Many customers withdrew their money from Credit Suisse and took it to the competition.
In Switzerland alone, UBS raised ten billion dollars in new money. In the USA it was eight billion dollars, in Asia six billion.
In its core business, asset management, UBS has not yet been able to convert new money into profits. The pre-tax profit of the most important division fell by seven percent to around 1.2 billion dollars.
The investment bank also continues to weaken: pre-tax profit fell by almost 50 percent to CHF 477 million. Only business with private and corporate customers was able to significantly increase revenues and profits.
UBS boss Ermotti also gave investors an outlook on the integration of Credit Suisse on Tuesday. Accordingly, the takeover could be completed as early as May.
In July, Ermotti finally wants to present the figures for the newly formed major Swiss bank for the first time. In the second half of the year, shareholders should learn more about possible synergies and the financial goals of the new megabank.
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