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Tuesday, May 21, 2024

UBS Bank reported a surprisingly high profit for the first quarter of 2024

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On Tuesday, UBS bank announced its results for the first quarter of 2024. Net profit for the period from January to March was almost three times higher than expected by analysts. At the same time, this is the first quarterly profit since the takeover of the declining rival – Credit Suisse.

The net profit of the largest bank in Switzerland amounted to USD 1.8 billion, which was much better than the market consensus for the company. Analysts expected the bank to be $602 million in the red.

“UBS achieved massive growth in the first quarter of 2024 thanks to higher revenues… and lower costs,” said Vontobel analysts quoted by Reuters.

They noted that the main impetus for profit growth came from “non-core” businesses inherited from Credit Suisse, which UBS plans to exit, but all operating units posted solid results.

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Big savings

UBS said it achieved an additional $1 billion in gross savings in the first quarter, bringing total savings since the merger to $5 billion. It aims to achieve another $1.5 billion in savings by the end of the year.

The group's wealth management business reported net new assets of $27 billion in the first quarter of the year, compared with $22 billion for the previous three months. However, UBS signaled that lower loan and deposit volumes, as well as lower interest rates in Switzerland, may impact results in the next quarter.

“In the second quarter of 2024, we expect (…) a single-digit decline in net interest income in this section,” the bank said in a statement.

UBS BankIn 2023, UBS bank was forced to take over rival Credit Suisse by Swiss authorities. Brookgardener / Shutterstock.com

UBS and Credit Suisse merger

The historic merger of two global systemically important banks – orchestrated by Swiss authorities who feared that scandal-ridden Credit Suisse was on the verge of collapse – ended last June. This was followed by two quarters of losses for UBS as it absorbed its former rival.

The merger of UBS AG and Credit Suisse AG is expected to be legally completed on May 31, with the merger of its Swiss operations expected to close in the third quarter.

Despite the sudden nature of the acquisition, investors are positive about UBS's prospects given the low acquisition costs and tremendous asset growth. The bank's shares have increased by about 40 percent over the past year.

Reuters reports that this year will be a key year for UBS as it tackles some of the more difficult integration steps, such as merging separate IT systems and legal entities, migrating customers from Credit Suisse to UBS and cutting jobs at banks.

The merger boosted UBS's balance sheet to more than $1.6 trillion, almost twice the size of the Swiss economy, worrying regulators who fear huge consequences if the bank runs into trouble.

Main photo source: MOZCO Mateusz Szymanski/Shutterstock

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