Overview

UBS, Switzerland’s largest bank, reported a second-quarter profit of $28.88 billion, marking its first earnings since completing the acquisition of stricken rival Credit Suisse. The result surpassed analysts’ expectations, who had projected a net profit of $12.8 billion. The strong performance was primarily driven by a $28.93 billion value on negative goodwill related to the acquisition.

Key Details

Underlying profit before tax, excluding negative goodwill, integration-related expenses, and acquisition costs, stood at $1.1 billion. This signifies UBS’ successful integration efforts after the complex merger. Negative goodwill represents the fair value of assets acquired in a merger that exceed the purchase price. UBS acquired Credit Suisse for a discounted 3 billion Swiss francs ($3.4 billion).

Ermotti’s Statements

Sergio Ermotti, the CEO of UBS, acknowledged the swift progress made in delivering value to stakeholders following the acquisition. He stated, “We are winning back the trust of clients, reducing costs, and taking necessary actions for future growth.” Ermotti emphasized UBS’ commitment to creating economies of scale and targeting strategic investments.

Integration of Credit Suisse

UBS announced the full integration of Credit Suisse’s stalwart domestic banking unit into its operations. The merging of legal entities is expected to finalize by 2024, following a meticulous analysis that deemed it beneficial for UBS, stakeholders, and the Swiss economy.

Rescue Deal and Regulatory Changes

The Credit Suisse acquisition was a part of an emergency rescue deal facilitated by Swiss authorities in March. UBS recently terminated a 9 billion Swiss franc ($10.24 billion) loss protection agreement and a 100 billion Swiss franc public liquidity backstop, which were implemented when the takeover was agreed upon.

Future Outlook

Ermotti assured clients of continued premium service, enhanced offerings, and expert capabilities through the integration of Credit Suisse’s Swiss banking division. UBS’ stronger capital base will allow unchanged lending exposures while maintaining risk discipline.

Recent Performance and Closing Notes

In the previous quarter, UBS experienced a surprise 52% annual drop in net profit due to a legacy litigation issue related to U.S. mortgage-backed securities. UBS shares closed with a nearly 30% increase since the beginning of the year, according to Eikon. This is a breaking news story, and more updates will follow.