Switzerland's largest bank re-asserted many of its main financial targets despite losing money in the fourth quarter. Asset flows and new deposits show clear strength in the period that followed its rescue of Credit Suisse.
UBS seems to be on the way to digesting what was once Switzerland's second-largest bank, according to an announcement related to its fourth quarter and full-year 2023 results published Tuesday.
Although integration costs from its government-prompted rescue effort last March again took their tool in the last quarter, when it posted a loss of 751 million US dollars, the bank managed to record $77 billion in new assets in its core global wealth management business (GWM) and another $77 billion in new deposits (both are net numbers) in the same wealth management business together with its personal and corporate business.
Dividend Increase
The bank reported that it would ask shareholders to raise its dividend for 2023 by 27 percent to $0.70 a share. It made progress in cutting the level of non-core and legacy assets and maintained its CET1 ratio at 14.5 percent and its leverage ratio at 4.7 percent.
UBS maintained that it had now completed the first phase of integration by «stabilizing the franchise» while achieving underlying profitability at the same time.
Negative Goodwill
Underlying pre-tax profit isolated from integration-related expenses and its investment in SIX Group was $592 million in the fourth quarter, down 35 percent from the third quarter as a result of lower client activity and declining levels of billable invested assets.
In 2023, UBS reported a net profit of $29.916 billion, of which 28.925 billion was related to negative goodwill related to the rescue of Credit Suisse. It also recorded 4.68 billion in integration expenses and acquisition costs.
Targets Reconfirmed
It also reiterated its end-2026 targets when it expects to complete the brunt of the integration efforts, seeing the return on CET1 ratio at around 15 percent along with a 70 percent underlying cost-income ratio. It re-affirmed cost cuts of $13 billion in the same timeframe with half of them seen being made by the end of this year.
It hopes to surpass the $5 trillion asset level in global wealth management by 2028 and bring in net new assets of around $100 billion this year and next, with that number seen rising to $200 billion in 2026.
Next Milestones, Outlook
The bank intends to merge its UBS AG and Credit Suisse AG entities by the end of the second quarter of this year and it plans to manage the Swiss entities (UBS Switzerland AG and Credit Suisse (Schweiz)) before the end of the third quarter.
UBS also said that it expects revenues to be «positively influenced» in the first quarter by seasonal factors, including higher levels of client activity compared to the end of last year.
Flat Interest Income
It expected its investment bank business to return to profitability while it saw net interest income at GWM and its personal and corporate banking business to be «roughly flat sequentially».
«These factors are expected to result in substantial sequential improvement in reported net profit in the first quarter, including around $1 billion of integration-related expenses and around $0.7 billion of pull to par and other purchase price (PPA) accretion effects,» the bank indicated.
Business Performance
At the specific business level, it indicated that revenues in GWM rose 18 percent as it consolidated Credit Suisse revenues, resulting in underlying profit of $778 million. Personal and corporate banking revenues almost doubled for the same reason, as did asset management revenues,which were up almost by two-thirds.
The investment bank business continued to lose money on a reported and adjusted basis although total revenues were up by slightly more than a quarter.
