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major swiss banks UBS on Tuesday narrowly beat fourth-quarter profit estimates and said it would resume up to $1 billion worth of share buybacks in the second half of the year.
The group posted a net loss attributable to shareholders of $279 million in the quarter, the second straight year of losses due to integration costs at bankrupt rival Credit Suisse. However, analysts surveyed by LSEG had expected the net loss to be even wider, to $372 million.
In addition to the share buyback, UBS plans to propose a dividend of $0.70 per share, an increase of 27% year-on-year.
In the third quarter, UBS reported a higher-than-expected net loss attributable to shareholders of $785 million, which included $2 billion in charges related to the integration of failed rival Credit Suisse.
Following this third quarter report, the market focused on the bank’s strong performance, with pre-tax operating profit well above expectations. Revenue for the fourth quarter was $592 million, below the company consensus of $762 million.
“We’re very pleased that we’re actually seeing good profitability on an underlying basis and we’re also seeing good momentum with our clients. Deposit inflows were also very good, UBS CEO Sergio Ermotti told CNBC on Tuesday.
“We also further improved on our goal of achieving cost savings by achieving an exit rate of $4 billion in cost savings in 2023, all of which contributed to the positive results. With that, you can reorganize and work on the next steps.’ Integration. “
UBS has so far reported that client flow to Credit Suisse’s wealth management business has returned faster than expected since the acquisition completed in June 2023.
Consolidation with beleaguered rivals continues, with UBS beginning to cut around 3,000 jobs at Credit Suisse as part of a broader reorganization.
UBS announced on Tuesday that the first phase of its strategic integration has been completed and the full merger is expected to be completed by the end of the second quarter.
Other highlights include:
- Group total revenue was $10.86 billion, down from $11.7 billion in the third quarter.
- The CET1 capital ratio, a measure of bank liquidity, was 14.5%, up from 14.4% in the previous quarter.
- Since the completion of the Credit Suisse acquisition in 2023, our flagship Global Wealth Management division has generated $77 billion in net new assets, with net new deposits across GWM and Personal and Corporate Banking totaling $77 billion. became.
- GWM’s net new assets in the fourth quarter were $21.8 billion.
Ermotti told CNBC’s Sylvia Amaro on Tuesday that delays are the biggest risk to the Credit Suisse merger, given the tough goals UBS has set for itself.
“In that sense, 2024 is a very important year because in the first half of this year we will be merging our two parent companies, merging our US operations and merging our Swiss operations. , we’ll be able to start realizing the following ‘synergies,”’ Ermotti said.
“IT migration is the second biggest potential problem, but we have a very specific plan. If you think about it, we have 6,000 deliverable tasks that need to be done. So we’re planning very carefully and carefully. There will be concentration risks in execution.”
UBS shares have had an indifferent start to 2024, falling 3.3% in early trading on Tuesday.
Markets will avoid ‘accounting noise’ in coming years
Morningstar equity analyst Johan Scholz says the market will ignore the headline numbers of UBS’s profits in the coming years and focus on more fundamental metrics, given the various costs associated with consolidation. Probably.
“UBS has given guidance that they are only looking to 2027 before they actually get to the point where all the accounting noise disappears from the results, but I think there are some other numbers that could be considered.” is a good indicator of the underlying health of the business,” Scholz said on CNBC’s “Capital Connection” on Tuesday.
He suggested that the key number to watch is the net new capital additions in the wealth management sector, particularly the Credit Suisse legacy part of the business.
“The reason net new money is so important is because assets under management obviously include market movements, and whether the combined entity is able to retain customers or not. “Credit Suisse suffered losses in its wealth management division due to concerns about the health of the Credit Suisse business,” Scholz explained. .
“It is also important to note that the Credit Suisse division of the wealth management business is actually close to break-even and slightly in the red. It is very important to manage the new assets to make a profit and return to the black. ”
