UBS Q2 2024 Earnings

Swiss banking giant UPS Bank of America Corp.’s second-quarter earnings beat expectations on Wednesday, amid moves to cut costs and boost revenue at its global wealth management and investment banking units.

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

However, the profit remained below the $1.755 recorded in the first quarter, as analysts had expected.

UBS shares were up 2.35% at 9:10 a.m. London time.

The group’s revenue also beat expectations in the second quarter, reaching $11.904 billion versus the LSEG poll of $11.522 billion.

UBS said strong activity in capital markets partly offset the negative impact on net interest income, which it had previously indicated would be weaker due to lower lending and deposit volumes and lower Swiss interest rates.

At the bank’s global wealth management unit, revenue rose 15% to $6.053 billion, which UBS said was largely due to the Credit Suisse merger. Revenue at the investment bank unit jumped 38% to $2.803 billion.

“We’ve shown good resilience across the board, in investment banking, in wealth management, but I also think we’re making good progress in de-risking our core businesses and reducing costs there,” UBS CEO Sergio Ermotti said in an interview with CNBC’s Silvia Amaro on Wednesday.

On the earnings front, Ermotti said: “It’s a combination of good momentum in revenue, but also good progress in reducing costs.”

He added that the bank has seen good momentum from client activity and transaction volumes in wealth management, despite some headwinds on its margins from lower net interest income.

It’s now been over a year since UBS officially acquired Credit Suisse, launching a massive merger and creating a wealth management giant. He said In early July, the merger was completed and Credit Suisse — the Swiss bank that spectacularly collapsed in March 2023 after years of financial scandals — no longer exists as a separate entity.

Shedding risk-weighted assets – a major part of Credit Suisse’s business – was a key part of this process.

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

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

“What follows is a few years of work. We are still far from the profitability that UBS achieved before it was asked to step in and save Credit Suisse,” Ermotti told CNBC, adding that the bank’s mission now includes focusing on the United States and the Asia-Pacific region.

In a note covering Wednesday’s results, analysts at RBC Capital Markets said: “UBS is delivering faster results on the factors it can control – cost savings and [non-conforming loan] “Lower energy demand leads to lower demand for energy – which should provide some protection against regulatory headwinds and a potentially more challenging operating environment.”

UBS shares have surged 51.7% in 2023 as investors eyed the benefits of its acquisition of Credit Suisse, for which it paid a price well below the bank’s value in a deal Facilitated by Swiss regulators.

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

UBS has strongly criticised the proposals as unnecessary, arguing that the bank is not “too big to be allowed to fail” – as the report claimed – and that it would limit Switzerland’s global competitiveness.

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

Regarding resistance to banking consolidation in Europe, Ermotti said on Wednesday that “the need for Europe to have larger financial players in order to enjoy its independence in financial matters is a given in my view.”

“Maybe we have to realize that Europe after the financial crisis went too far in fragmenting or not allowing the unification of the system that is now punishing Europe and its financial system,” he added.