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UBS Posts $29B Q2 Profit, First Since Credit Suisse Acquisition

UBS, Switzerland’s largest bank, has reported a remarkable second-quarter profit of $28.88 billion in its initial earnings statement following the successful acquisition of distressed rival Credit Suisse. Analysts had predicted a net profit of $12.8 billion for the period from April to June. The impressive figure is primarily attributed to $28.93 billion in negative goodwill stemming from the Credit Suisse takeover. Underlying profit before tax, excluding negative goodwill and integration-related expenses, was $1.1 billion.

Negative goodwill represents the excess value of assets acquired in a merger over the purchase price. UBS acquired Credit Suisse for a discounted 3 billion Swiss francs ($3.4 billion) in March.

UBS CEO Sergio Ermotti emphasized the swift delivery of value to stakeholders post-merger and highlighted the focus on rebuilding client trust, reducing costs, and optimizing resource allocation for future growth.

The bank’s key metrics include a CET 1 capital ratio of 14.4%, a return on tangible equity (excluding exceptional items) of 4.3%, and a CET 1 leverage ratio of 4.8%. Additionally, UBS announced the complete integration of Credit Suisse’s Swiss banking unit into its own operations, with legal entity merging anticipated to conclude by 2024.

Ermotti affirmed this as the optimal strategy for UBS, stakeholders, and the Swiss economy. The integration, however, may face scrutiny due to potential job losses.

The Credit Suisse acquisition was part of a rapid rescue agreement orchestrated by Swiss authorities in March. UBS’s decision to discontinue a loss protection agreement and liquidity backstop marked its increasing independence from Swiss government support.

The bank aims to achieve gross cost savings of at least $10 billion by 2026, emphasizing its commitment to the integration of Credit Suisse’s businesses.

UBS shares have surged approximately 30% since the start of the year. Credit Suisse, now under UBS ownership, reported a second-quarter net loss of 9.3 billion Swiss francs, attributed to significant client and staff departures.

UBS acknowledges the attrition rate’s decline and will strive to retain Credit Suisse’s clients to ensure the success of this significant merger.