UBS handily beats estimates with first profit since Credit Suisse takeover

By Noele Illien

ZURICH (Reuters) -UBS booked net income for January-March that was more than double estimates as it logged its first quarterly profit since taking over fallen rival Credit Suisse.

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

UBS, however, 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.

UBS also 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 to achieve another $1.5 billion in savings by the end of the year.

Net income attributable to shareholders for Switzerland’s largest bank came in at $1.8 billion, better than a company-provided consensus estimate of $602 million and a profit of $1 billion in the same period a year earlier.

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

Despite the shotgun 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.

With the merger, UBS’s balance sheet has expanded to more than $1.6 trillion, nearly twice the size of Switzerland’s economy and worrying regulators who fear huge consequences should the bank run into trouble.

Switzerland’s government recently laid out plans for how to police banks deemed “too big to fail” and tougher capital rules are expected sometime in the next few years.

UBS said its current financials will allow it to execute on its 2024 capital return targets.

This includes a plan to repurchase up to $1 billion in shares this year as well as increase last year’s dividend of $0.70 per share by a mid-teen percentage in 2024.