Consolidated financials for 2Q23 and 1H23 include results for the former Credit Suisse business from 1 June 2023
- − 2Q23 net profit of USD 29bn including USD 29bn of negative goodwill from CS acquisition to sustain USD 238bn assumed RWA; underlying1 PBT of USD 1.1bn, of which USD 2.0bn from the UBS sub-group
- − Strong capital position maintained with CET1 capital ratio of 14.4% and CET1 leverage ratio of 4.8%
- − Credit Suisse (Schweiz) AG to be fully integrated following a thorough evaluation focused on creating lasting value for all stakeholders; closing of legal entity merger expected in 2024
- − Credit Suisse AG reports a 2Q23 US GAAP pre-tax loss of CHF 8.9bn; CHF 4.3bn excluding acquisition-related effects; adjusted pre-tax loss of CHF 2.1bn2
- − Credit Suisse franchise broadly stabilized with net deposit inflows of USD 18bn in 2Q23, momentum continuing into 3Q23
- − UBS Global Wealth Management recorded highest second-quarter net new money in over a decade at USD 16bn, momentum continuing into 3Q23
- − Non-core and Legacy perimeter defined with clear plans to substantially reduce capital consumption by year-end 202 with USD 9bn in RWAs exited in 2Q23
− Plans to achieve greater than USD 10bn gross cost reductions, C/I ratio of <70%, and RoCET1 of around 15% exit-rate 2026
Sergio P. Ermotti, Group CEO:
“Two and a half months since closing the Credit Suisse acquisition, we are wasting no time in delivering value for all our stakeholders from one of the biggest and most complex bank mergers in history. We are winning back the trust of clients, reducing costs and taking the necessary actions to create economies of scale that will allow us to better focus our resources and target investments for future growth. This combination will reinforce our status as a premier global franchise – and one that our home market, Switzerland, can be proud of. We are humbled by this task, and the responsibility entrusted to us.”
Update on CS acquisition and priorities for 2023
On 12 June 2023, we successfully closed the acquisition of Credit Suisse Group AG. Since then, we have started to implement our target operating model, which includes leadership appointments up to three levels below the Group Executive Board. We have also stabilized Credit Suisse’s Wealth Management and Swiss Bank, defined the Non-core and Legacy perimeter and reduced its risk-weighted assets by USD 9bn during the second quarter, we have repaid liquidity support to the Swiss National Bank and voluntarily terminated the Public Liquidity Backstop and Loss Protection Agreement. Today, 31 August 2023, we have announced our decision to fully integrate Credit Suisse’s Swiss Bank.
Credit Suisse (Schweiz) AG to be fully integrated
Sergio P. Ermotti, Group CEO:
“Our decision on Credit Suisse (Schweiz) AG follows a thorough evaluation of all available options. Our analysis clearly shows that full integration is the best outcome for UBS, our stakeholders and the Swiss economy. Clients will continue to receive the premium level of service they expect, benefiting from enhanced offerings, expert capabilities and global reach. Our stronger capital base will enable us to keep the combined lending exposures unchanged, while maintaining our risk discipline.”
The full integration will reinforce the strengths that make UBS the leading bank in Switzerland. Clients will benefit from an enhanced product offering and unique global capabilites enabled by the combination of both businesses. Together, we will be able to offer a broader investment platform. Our capital and financial strength allows us to continue to serve and finance all our clients without compromising on our risk capacity and standards. Competition in the Swiss market remains robust across all our business activities. The cantonal banks in aggregate will continue to have the highest market shares in all relevant personal and commercial banking products. After the merger our branch network will be the third biggest in Switzerland.”
UBS and Credit Suisse’s Swiss Bank will operate separately until their planned legal merger in 2024. The Credit Suisse brand and operations will remain in place until we complete the migration of clients to our system, which we expect in 2025.
Sergio P. Ermotti, Group CEO:
“Our goal is to make the transition for clients as smooth as possible. The two Swiss entities will operate separately until their planned legal integration for 2024 with the gradual migration of clients onto UBS systems expected to be completed in 2025. Nothing will therefore change for clients in the foreseeable future. As we progress the integration, we remain fully committed to our personal, private, institutional and corporate clients.”
Continued stabilization of Credit Suisse franchise
Since the close in June, we engaged with clients across the businesses and saw their confidence returning, as evidenced by positive trends in deposit flows which have carried into July and August. For the second quarter, net inflows into deposits for the combined group were USD 23bn, of which USD 18bn from Credit Suisse’s Wealth Management and Swiss Bank. While asset outflows from Credit Suisse’s Wealth Management division continued in the second quarter, they did so at a slower pace compared to previous quarters and turned positive in June.
Across UBS’s asset gathering businesses, we continued to see strong momentum in the second quarter. UBS Global Wealth Management saw net new money (NNM) inflows of USD 16bn, the highest second-quarter inflows in over a decade, and Asset Management NNM was USD 17bn (or USD 19.5bn excl. money market and associates).
Throughout July and August 2023 we recorded further USD 8bn NNM inflows in the combined wealth management businesses.
Non-strategic assets and businesses to be exited through Non-Core and Legacy
We have created a Non-core and Legacy (NCL) business division, which will include Credit Suisse positions and businesses not aligned with our strategy and policies, such as the assets and liabilities of the Capital Release Unit (Credit Suisse) and the majority of assets and liabilities of the Investment Bank (Credit Suisse), Wealth Management (Credit Suisse) and Asset Management (Credit Suisse), as well as the remaining assets and liabilities of UBS’s NCL portfolio and smaller amounts of assets and liabilities of UBS business divisions that we have assessed as not strategic in light of the acquisition of the Credit Suisse Group. As of 30 June 2023, the positions that will be included in NCL represented approximately USD 55bn of risk- weighted assets (RWA), excluding operational risk RWA, and USD 224bn of leverage ratio denominator (LRD). About half of these RWA are expected to run off by the end of 2026. We intend to actively reduce the assets of the NCL unit in order to reduce operating costs and financial resource consumption, and to enable us to simplify infrastructure.
Aim to achieve gross exit-rate cost saving greater than USD 10bn by end-2026
We aim to substantially complete the integration by the end of 2026. We further aim to achieve gross cost reductions of over USD 10bn by that time. Cumulative integration-related expenses are expected to be broadly offset by accretion-to- par effects of approximately USD 12bn related to fair value adjustments applied to amortized-cost financial instruments.
As part of the integration we plan to simplify our legal structure, including the merger of UBS AG and Credit Suisse AG planned for 2024.
Based on these plans, and excluding integration-related expenses and accretion-to-par effects, we aim to achieve an exit rate cost income ratio of less than 70% by the end of 2026, and to progress toward a 2026 exit rate return on CET1 capital of around 15%.
We expect 3Q23 underlying PBT for UBS Group to be at around breakeven, and to deliver positive underlying PBT in 2H23, supported by various levers, including revenue stabilization, cost saves and lower funding costs.
Future reporting and disclosures
Beginning with the third quarter of 2023, we will report five business divisions – Global Wealth Management, Personal and Corporate Banking, Asset Management, Investment Bank, and Non-core and Legacy and to separately report Group Items.
We will provide further updates with our third quarter results and a more extensive strategic update at our fourth quarter and full year earnings.
The full results can be read here.
Source: UBS
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