UBS shares soared to their highest point since late 2008 during early trade in Zurich on Thursday, driven by an impressive profit beat and significant merger news. The Swiss banking giant reported a staggering second-quarter profit of $28.88 billion, far surpassing analysts’ expectations of $12.8 billion. The boost was largely attributed to $28.93 billion in negative goodwill from its acquisition of Credit Suisse.
UBS CEO Sergio Ermotti confirmed that the integration of Credit Suisse’s Swiss banking division is progressing well, with negative goodwill playing a crucial role in fortifying the risk-weighted assets and facilitating a necessary restructuring. The merger plan involves fully absorbing Credit Suisse’s domestic banking unit by 2024, marking a substantial step for UBS.
The acquisition wasn’t without challenges, as it led to job losses. UBS unveiled that 1,000 redundancies would occur due to the integration of the Swiss bank, while an additional 2,000 layoffs would be due to Credit Suisse’s broader restructure. Despite these changes, Ermotti assured clients of continued premium service and offerings, supported by a stronger capital base.
The merger aims for gross cost savings of at least $10 billion by 2026, as UBS continues to forge ahead with its transformation plans. The bank’s financial results also indicated an uptick in deposit inflows, providing evidence of customer loyalty amid the transition.
Ermotti highlighted the positive momentum, stating that they’re gradually recouping some of the $200 billion lost by Credit Suisse during recent challenging periods. UBS’ flagship global wealth management business also showcased remarkable performance, securing $16 billion in net new money for the second quarter, the highest in over a decade.
