UBS shares climbed on Tuesday morning after the Swiss banking giant resoundingly beat expectations for underlying profit.
The bank recorded an underlying operating profit before tax of $844 million, well ahead of consensus expectations. UBS shares were up 3.2% by mid-afternoon in Europe.
Factoring in $2 billion in expenses related to the integration of fallen rival Credit Suisse, UBS posted a bigger-than-expected third-quarter net loss attributable to shareholders of $785 million. Analysts polled by Reuters had anticipated a quarterly net loss of $444 million in a company-compiled poll.
Here are some other highlights:
- Total group revenues were $11.7 billion, up 23% from $9.54 billion in the second quarter.
- CET1 capital ratio, a measure of bank liquidity, was 14.4%, unchanged from the previous quarter.
- Credit Suisse Wealth Management generated positive net new money inflows for the first time since the first quarter of 2022, contributing to inflows of $22 billion for UBS Global Wealth Management.
"You could see that, sequentially, we improved the underlying performance across Wealth Management, Asset Management and our Personal and Corporate banking in Switzerland. They both grew on a quarter-on-quarter basis," UBS CEO Sergio Ermotti told CNBC on Tuesday.
"The IB [investment bank] has been facing more challenging market conditions, particularly when you look at our business model and the fact that we have been onboarding resources from Credit Suisse. But it was a very solid quarter, and we made very good progress in our integration plans, and at the same time we saw very strong inflows from clients."
A 'good set of results'
Analysts at Citi highlighted on Tuesday that the $844 million underlying profit before tax figure was "notably ahead of prior company guidance (of break-even), treble consensus expectations and 6% ahead of our above-consensus forecast."
"As we expected the beat is driven by better opex [operating expense], 7% below consensus, with revenues also 1% ahead. This is then slightly offset by heavier provisions," they noted, adding that the acceleration of Wealth Management net new money inflows in September was also "encouraging."
Citi concluded that Tuesday's report was "overall a good set of results" and reiterated its Buy/High Risk rating.
UBS completed its takeover of its stricken domestic rival in June and announced in August that it had ended a 9 billion Swiss franc loss protection agreement and a 100 billion Swiss franc public liquidity backstop that were put in place when the emergency rescue was agreed in March.
The bank's shares soared to their highest point since late 2008 in August after its second quarter earnings results reported a $28.88 billion net profit as a result of negative goodwill on the Credit Suisse acquisition.
Negative goodwill represents the fair value of assets acquired in a merger over and above the purchase price. UBS paid a discounted 3 billion Swiss francs ($3.33 billion) to acquire Credit Suisse in March, in a deal mediated by Swiss authorities to prevent the collapse of the storied but scandal-plagued lender.
The stock price has since moderated slightly, but remains up more than 27% on the year.
UBS is also in the process of fully integrating Credit Suisse's Swiss banking unit — a key profit center — and is expected to cut a hefty proportion of the legacy bank's workforce.
UBS reported net new deposits of $33 billion across its Global Wealth Management and Personal and Corporate Banking (P&C) divisions, with $22 billion coming from Credit Suisse clients and positive deposit inflows for P&C in September, the month after UBS announced the decision to integrate the domestic bank.
The bank also announced earlier this year that it is targeting gross cost savings of at least $10 billion by 2026, when it hopes to have completed the integration all of Credit Suisse Group's businesses.