Swiss banking titan UBS on Wednesday posted a big revenue beat, after finishing its first wave of shopper migrations following its integration of collapsed home rival Credit score Suisse.
Internet revenue attributable to shareholders got here in at $1.43 billion, in contrast with a imply forecast of $667.5 million in a LSEG ballot of analysts.
Group income was $12.33 billion, above analyst expectations close to $11.78 billion.
Different third-quarter highlights included:
- Working revenue earlier than tax of $1.93 billion, up from a lack of 184 million in the identical quarter final 12 months.
- Return on tangible fairness hit 7.3%, in contrast with 5.9% over the second quarter.
- CET 1 capital ratio, a measure of financial institution solvency, was 14.3%, down from 14.9% within the second quarter.
The lender stated it expects to finish its deliberate $1 billion share buyback program within the fourth quarter and intends to proceed repurchases in 2025.
UBS shares have been up 2.4% at 08:33 a.m. London time.
“We began to see the advantages of our diversified enterprise mannequin, our international attain,” CEO Sergio Ermotti instructed CNBC’s Annette Weisbach on Wednesday of the financial institution’s forecast-beating third-quarter outcomes. “We’re additionally [in] a market atmosphere that was difficult but in addition provided alternatives for buyers to place themselves. So I believe it is a good combine of things.”
UBS’ Funding Banking division shone within the third quarter, with the department’s internet earnings up 36% year-on-year, largely resulting from efficiency in fairness derivatives, overseas trade and charge revenues. The financial institution additionally famous a rise in International Banking.
International Wealth Administration, in the meantime, shed 6% year-over-year, because of decrease deposit margins and weaker mortgage revenues, following softer common volumes.
UBS turned course again towards revenue within the first quarter of 2024 after two quarterly losses tied to the takeover of stricken Credit score Suisse — an intensive, now accomplished course of mired in OECD warnings over “new dangers and challenges” posed to the broader Swiss financial system and governmental considerations concerning the capital necessities of the ensuing banking juggernaut. UBS defends it isn’t “too huge to fail.”
The banks’ union has spurred UBS to trim bills, with the banking big saying in its second-quarter earnings launch that it anticipated ending 2024 with cumulative gross financial savings from the Credit score Suisse deal of $7 billion, out of a $13 billion goal by 2026. The figures evaluate with a 2022 baseline.
Signage at the usflagship workplace in New York, US, on Tuesday, March 21, 2023.
Bloomberg | Bloomberg | Getty Photos
UBS nonetheless faces the lofty duties of integrating its IT system with that of Credit score Suisse, together with migrating purchasers — with the latter transition set to take round 18 months, Reuters reported earlier this month. The financial institution on Wednesday stated that in October it accomplished the migration of its International Wealth Administration shopper accounts in Luxembourg and Hong Kong to UBS platforms and intends to switch over International Wealth Administration shopper accounts booked in Singapore and Japan by the top of the 12 months.
Subsequent steps
A 12 months and a half since UBS’ strong-armed merger with Credit score Suisse, the onus is now on Ermotti to set the financial institution’s trajectory in opposition to a panorama formed by geopolitical volatility, declines in rates of interest and stress to maintain tempo with the double-digit revenue progress of U.S. adversaries, comparable to Goldman Sachs and Morgan Stanley. Domestically, UBS operates within the confines of an financial system outlined by a sturdy Swiss franc and plunging annual inflation that slipped to simply 0.8% in September, elevating questions over additional financial coverage easing from the Swiss Nationwide Financial institution — and the impression of such interventions on the profitability of economic lenders.
Requested on the extent of the impression of rate of interest declines on UBS’ upcoming efficiency, Ermotti instructed CNBC: “Little or no. So, I imply, comparatively easy, undoubtedly with different banks and banking fashions, now we have solely 20% of our revenues are coming from internet curiosity incomes.”
He added, “Really once we see rates of interest coming down, we see purchasers in some circumstances taking up extra leverage … so I believe that now we have virtually an offsetting issue. Having stated that, decrease charges within the foreseeable future can have nonetheless somewhat little bit of an impression on our income, however it will likely be offset by, as I stated, transaction volumes and fee-based companies.
The usboss however harassed ongoing volatility within the fourth-quarter’s horizon on the subject of broader international markets.
“The outlook for the fourth quarter is clearly nonetheless one way or the other influenced by the uncertainties we see on the macroeconomic and geopolitical entrance, now we have the upcoming elections within the U.S., which after all will not be going to be an uneventful occasion,” he stated.
“The outlook is constructive (continued robust shopper exercise),” Vontobel analysts stated in a notice, stressing that the lender’s third-quarter outcomes beat forecasts on higher-than-expected revenues throughout all working divisions.
“The migration of knowledge of 1.3 mn purchasers poses the following huge problem. Nonetheless, the primary wave of shopper account migrations has been accomplished efficiently and the financial institution has (thus far) been forward of schedule on points it might probably management.”
RBC analysts certified the usresults as “robust,” however famous ongoing uncertainties rising from the financial institution’s potential too-big-to-fail standing and help from “good earnings momentum and execution of the merger synergies.
The usresults come after the revenue beat of Germany’s largest lender Deutsche Financial institution final Wednesday and be a part of this week’s spate of third-quarter stories from European lenders, together with from BNP Paribas and Santander.
— CNBC’s Ganesh Rao contributed to this report.
