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UBS has posted its first quarterly loss in nearly six years because the Swiss lender laid bear the prices of integrating Credit score Suisse following the state-orchestrated rescue of its rival.
The deal is anticipated to be a boon for UBS in the long term, cementing its place as international wealth administration powerhouse, however the banking trade’s most complicated takeover because the 2008 monetary disaster has introduced dangers.
The price of integrating its rival drove UBS to a internet lack of $785mn within the third quarter, the financial institution stated on Tuesday, bigger than the $444mn anticipated by analysts because the financial institution shouldered $2.2bn of bills tied to the deal. Stripping these out, the lender generated a pre-tax revenue of $844mn.
“We’re optimistic about our future as we construct an excellent stronger and safer model of the UBS that was referred to as upon to stabilise the monetary system in March and one that each one of our key stakeholders will be pleased with,” stated chief government Sergio Ermotti.
Ermotti, who returned to the helm inside days of UBS agreeing to take over Credit Suisse in March, is ready to unveil a brand new technique for the mixed group subsequent yr.
Credit score Suisse, which is working as a subsidiary of UBS and can be legally merged with the broader group subsequent yr, had signalled it anticipated a loss of at least $2.2bn within the third quarter via exiting loans and winding down an funding administration contract it signed with US various funding supervisor Apollo final yr.
A key problem for UBS in benefiting from the deal is retaining purchasers who could also be delay by the turbulence surrounding the combination. The financial institution stated it had minimize 13,000 jobs this yr, leaving the mixed group’s headcount at 116,000 on the finish of the third quarter.
UBS wealth administration executives face acute strain to retain large purchasers from each banks after the merger, particularly within the Center East, the place a number of key relationship managers have defected to rivals.
The Swiss financial institution not too long ago extended a $9bn credit facility to Qatar’s former prime minister, Sheikh Hamad bin Jassim bin Jaber al-Thani, who was a shopper of UBS and Credit score Suisse. He additionally oversaw the Qatar Funding Authority’s funding in Credit score Suisse through the 2008 monetary disaster.
UBS managed to usher in $22bn of internet new cash into its wealth administration enterprise within the quarter, providing engaging rates of interest because it fought to win again purchasers who had pulled their cash within the quick aftermath of the takeover.
Throughout the group, UBS attracted $33bn of internet new deposits, with two-thirds coming from Credit score Suisse purchasers.
Echoing the efficiency of a number of European rivals, UBS’s funding financial institution had a lacklustre quarter. It suffered a $230mn loss, largely pushed by a fall in international markets revenues and a 50 per cent improve in working prices, principally tied to the combination.
“Optically, UBS reported an affordable set of outcomes,” stated Keefe, Bruyette & Woods analyst Thomas Hallett. “Nonetheless, after we dig a little bit deeper, it feels considerably underwhelming.”
In an indication that traders have broadly welcomed the deal, UBS shares have risen 26 per cent because the rescue of its rival.
The shares got a lift over the summer season when UBS stated it might not depend on taxpayer cash to finish the deal. It terminated a SFr100bn liquidity lifeline supplied by the Swiss Nationwide Financial institution on the top of the turmoil that swept the banking sector within the spring and culminated within the Credit score Suisse takeover.
In August, UBS reported its biggest-ever quarterly profit, nearly solely pushed by a $29bn accounting acquire linked to the takeover.
Since finishing the acquisition, UBS has tried to settle a spate of long-running authorized disputes, together with one with the federal government of Mozambique final month over an alleged £2bn “tuna bond” fraud that wrecked the nation’s funds.
UBS on Monday stated it had reached an settlement with Lebanese shipbuilder Privinvest to settle a associated case within the London Excessive Court docket.
The takeover itself has sparked a minimum of $9bn of authorized claims from traders who misplaced cash on the deal.