Switzerland's last major bank recorded a substantial $29 billion in profit for the second quarter of 2023, mainly because of negative goodwill related to Credit Suisse, which posted another large loss. UBS also decided to fully integrate the latter's Swiss business. 

It was a step that many had speculated had been on the way for months but it will still raise waves in Switzerland and have wide repercussions throughout the domestic finance hub. During the release of second-quarter results Thursday, UBS announced that it would fully integrate the Swiss business of Credit Suisse after it was forced to acquire the entire group, once the country's second-largest bank, under pressure from the government and regulators earlier this year.

UBS also announced a pre-tax profit of $29 billion, mostly made up of negative goodwill related to the deal. Because of this, year-earlier figures are not directly relevant. For its part, Credit Suisse continued to lose money, posting a significant pre-tax loss while UBS itself made a $2 billion net profit.

Wasting No Time

UBS indicated in the disclosure materials that it was «wasting no time» in implementing what it considered to be one of the biggest and most complex banking mergers in history.

As part of that, a comprehensive analysis of the Swiss business of Credit Suisse revealed that full integration would likely be the best outcome for the business, stakeholders, and the wider economy although both entities will continue to operate separately until a planned legal merger next year. Until then, Credit Suisse's brand and operations will remain until clients are fully migrated to the UBS system, which is expected to be in 2025.

According to the bank, clients will continue to receive the same levels of service and the group's strengthened capital base will enable it to keep combined lending exposures unchanged.

Stabilizing Credit Suisse

UBS did indicate that it believed it had continued to stabilize the Credit Suisse franchise and that client confidence in various businesses appeared to be improving after the deal was closed in June.

The bank also maintained that it fully intended to complete the entire integration by 2026 and that it saw cost savings of more than $10 billion by that time. It also maintained that profit in the third quarter of this year was expected to be at breakeven but positive for the combined second half.

Business Performance 

Breaking down business performance, UBS indicated that Global Wealth Management saw revenues rising a modest 1 percent year-on-year to slightly more than $4.7 billion, although net interest income was up a sharper 14 percent as a result of rising interest rates, which also helped deposit margins.

Despite that, average deposit volumes were down while recurring net fee income fell 3 percent as a result of negative market impacts. The level of net new fee-generating assets was $12.6 billion and net new money was $16.2 bln.

Personal and corporate banking revenues were up almost a quarter and profits were up by more than half as the business benefited from higher interest rates while the asset management business saw a drop related to the year-earlier bump from selling its Mitsubishi Corp-UBS Realty joint venture. Investment Bank revenues fell as well.

Rising Activity

UBS maintained that it was seeing a pickup in client sentiment and transactional momentum with wealth management clients although geopolitical tensions and the Russia-Ukraine war are keeping things uncertain. It did indicate it expected continued positive net new asset flows in its wealth and asset management franchises, with that and higher asset valuations seen as having a positive impact on recurring income.

Capital and leverage ratios remained stable in the second quarter, as did liquidity buffers.