UBS Q2 2024 Results

Swiss banking giant UBS On Wednesday, it beat expectations for second-quarter net profit amid cost-cutting measures and rising revenue at the lender’s global wealth management and investment banking units.

Net income attributable to shareholders amounted to $1.136 billion for the period, compared with the company’s consensus forecast of $528 million.

However, the profit was lower than the $1,755 posted in the first quarter, as expected by analysts.

UBS shares closed up 5.29%, extending earlier gains.

Group revenue also beat forecasts in the second quarter, coming in at $11.904 billion versus a survey compiled by LSEG of $11.522 billion.

UBS said strong activity in capital markets had partially offset the drag on net interest income, which it had previously warned would be weaker due to lower loan and deposit volumes and lower Swiss interest rates.

In the bank’s global wealth management unit, revenue rose 15% to $6.053 billion, which UBS said was largely due to the consolidation of Credit Suisse. Revenue in the investment banking unit rose 38% to $2.803 billion.

“Overall, we’re showing pretty good resilience, in investment banking and in wealth management, but I also think we’re making good progress in de-risking our core and reducing costs there,” UBS CEO Sergio Ermotti told CNBC’s Silvia Amaro in an interview on Wednesday.

Commenting on the results, Ermotti said: “It is a combination of a good boost in revenues, but also good progress in cost reduction.”

He added that the bank was seeing good momentum in client activity and transaction volumes in wealth management, although there were some headwinds to its margins due to lower net interest income.

It has been more than a year since UBS formally acquired Credit Suisse, triggering a massive integration process and creating a wealth management giant. UBS said in early July that the merger process had been completed and that Credit Suisse, the Swiss bank that spectacularly collapsed in March 2023 after years of financial scandals, no longer existed as a separate entity.

Eliminating risk-weighted assets — a major part of Credit Suisse’s business — has been a key part of that process.

UBS said it now expects to end 2024 with cumulative gross savings of $7 billion from the Credit Suisse deal, up from a target of $13 billion by 2026 compared with a 2022 baseline. It had previously targeted $6.5 billion in savings by year-end.

The bank returned to profit in the first quarter of 2024 after two quarterly losses related to the cost of integration.

“What’s next is a few years of work. We’re still a long way from the profitability UBS had before they were asked to step in and rescue Credit Suisse,” Ermotti told CNBC, adding that the bank’s task now includes focusing on the US and Asia-Pacific region.

In a note covering Wednesday’s results, analysts at RBC Capital Markets said: “UBS is delivering faster on the factors it can control: cost savings and [non-conforming loan] “The situation is deteriorating, which should provide some headroom in the face of regulatory hurdles and a potentially more challenging operating environment.”

UBS shares soared 51.7% in 2023 as investors eyed the benefits of its acquisition of Credit Suisse, for which it paid a much lower price than the bank was worth in a deal facilitated by Swiss regulators.

The stock has since fallen 3.75% this year, partly hurt by new banking regulations proposed by Swiss authorities in an April report that would see UBS and three other “systemically relevant” banks face stricter capital requirements to protect the broader economy.

UBS has strongly criticised the proposals as unnecessary, arguing that the bank is not “too big to fail” – as the report claims – and that they would hamper Switzerland’s global competitiveness.

Ermotti told CNBC on Wednesday that UBS was “part of the solution” to banking instability in its rescue of Credit Suisse, rather than exacerbating the problem.

On the issue of resistance to banking consolidation in Europe, Ermotti said on Wednesday that “the need for Europe to have larger financial players in order to have its own financial independence is a fact, from my point of view.”

He added: “It is probably fair to say that after the financial crisis, Europe went too far in fragmenting or not allowing consolidation of the system, which is now penalising Europe and its financial system.”

In its second-quarter earnings outlook, UBS said the macroeconomic outlook was “clouded by ongoing conflicts, other geopolitical tensions and the upcoming US election,” all leading to increased market volatility compared with the first half of the year.

However, when asked about the recent rise in fears of a US recession (as expected by people such as JPMorgan Chase CEO Jamie Dimon), Ermotti said a “slowdown” in growth seemed more likely.