UBS' third-quarter profit almost double expectations

By Dave Graham

ZURICH (Reuters) -UBS Group posted on Wednesday third-quarter profit well above forecasts, driven by higher revenue and cost reductions, and said it had completed the first wave of client migrations from Credit Suisse since acquiring its old rival last year.

Net profit attributable to shareholders at Switzerland's largest bank was $1.4 billion, nearly double the $740 million estimated by analysts in a company-provided poll.

Group total revenue came in at $12.3 billion, ahead of a consensus figure of $11.5 billion.

A breakdown of the figures showed that UBS's investment bank delivered an operating profit twice as high as a consensus forecast provided by the bank, while reported losses at the non-core and legacy unit were below forecasts.

"Against a market backdrop that, while constructive, still exhibited periods of high volatility and dislocation, our business delivered impressive revenue growth as we maintained strong client momentum, particularly in the Americas and APAC," UBS CEO Sergio Ermotti said in a statement.

"We continue to significantly mitigate execution risk as we progress on the integration of Credit Suisse while remaining disciplined in driving our cost and efficiency targets."

The bank said it was progressing well with cost reduction plans and now expects to achieve a figure of around $7.5 billion this year. Previously it had forecast around $7 billion.

Operating expenses were $10.3 billion in the quarter, down from more than $11.6 billion in the same period a year earlier.

"Overall a solid set of results, which should also serve as a positive read-across to peers including Julius Baer," Citi analysts said in a research note.

UBS said it expected market conditions to be similar during the fourth quarter, aided by the prospect of a soft landing in the U.S. economy. But it noted that the macroeconomic outlook in the rest of the world remained clouded.

"In addition to seasonality ... ongoing geopolitical conflicts and the upcoming U.S. elections are creating uncertainties that are likely to affect investor behavior," it said.

In May, UBS formally completed the merger with its long-time rival Credit Suisse, which collapsed last year following a string of financial setbacks and scandals.

UBS is pushing ahead with the integration of Credit Suisse, and Ermotti said last month it was running ahead of schedule.

The bank recently began migrating clients from Credit Suisse onto its own platforms, a process that Ermotti said last week would likely take about 18 months.

UBS said it had successfully completed the first wave of client account migrations with transfers in Luxembourg and Hong Kong during October and that Singapore and Japan were expected by year-end. Switzerland would follow next year, it added.

Investors have welcomed the takeover, with UBS shares up well over 60% since it bought Credit Suisse in March 2023.

Uncertainty continues to dog UBS, though, because markets are waiting to see how tough new regulations for the bank sketched out by Swiss authorities earlier this year turn out to be.

The government wants UBS and other systemically relevant banks to hold more capital in order to prevent the risk of another Credit Suisse-style collapse in future.



UBS and the country's banking lobby have pushed back against this, warning that saddling lenders with excessive burdens could make the sector less competitive and hurt business.

Swiss financial market regulator FINMA has also ordered UBS to improve its emergency and recovery plans following the demise of Credit Suisse, an event which shook confidence in Swiss banking among some wealthy clients, a recent study showed.

Source: Investing.com