UBS reports stronger than expected profit in first quarter

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UBS has reported its first quarterly profit since taking over Credit Suisse as the Swiss lender begins to reap the benefits of rescuing its former rival.

The group on Tuesday reported $1.8bn in net profit for the first three months of the year, up from a $279mn loss in the previous quarter and almost three times the $602mn expected by analysts.

Its wealth management business was again a powerhouse, attracting $27bn in net new assets as clients returned to the lender after pulling money from both UBS and Credit Suisse last year amid the turmoil triggered by the rescue.

Revenues increased 15 per cent from the previous quarter to $12.7bn, while UBS also trimmed expenses by 5.5 per cent. It generated an additional $1bn in cost savings during the quarter, having eliminated $5bn in costs last year. UBS has said it aims to reduce costs by $13bn by the end of 2026, with a further $1.5bn of savings over the course of 2024.

“This quarter marks the return to reported net profits and further capital accretion — a testament to the strength of our business and client franchises and our ability to deliver significant progress on our integration plans while actively optimising our financial resources,” said chief executive Sergio Ermotti.

While UBS agreed to buy Credit Suisse in March 2023, the deal was not completed until last June. UBS executives have warned of a bruising and lengthy integration process that will take time to bed in. Ermotti, who was parachuted in for a second stint as CEO to oversee the takeover, has previously said that 2024 would be the “pivotal year” for the integration during which most costs would hit.

UBS shares are up 42 per cent over the past year but have fallen more than 12 per cent in the past month since the Swiss finance department proposed significantly increasing the group’s capital requirements.

Swiss finance minister Karin Keller-Sutter has since suggested this could lead to $15bn-$25bn of additional capital for UBS, which has “seriously concerned” the bank, according to its chair Colm Kelleher.

UBS reported $78bn of common equity tier one capital on Tuesday. The bank’s CET1 ratio, which compares its core capital with its risk-weighted assets and indicates its financial resilience, was 14.8 per cent.

The bank said it was on track to meet its 2024 capital return targets and has promised to buy back $2bn of shares from investors.