UBS Shares Gain at Market Open Despite $785M Loss in Q3, Here’s Why
UBS, Switzerland’s largest bank, posted a net loss of $785 million in Q3, the first negative income in nearly six years. However, the bank’s US-listed shares rose 1.3% at the market open as investors saw the loss as a temporary blow caused by the complex Credit Suisse deal while finding several positives in the report.
UBS Reports Pretax Income of $844 Billion, Excluding Credit Suisse Acquisition Impact
UBS reported a net loss of $785 million for the third quarter, almost double what analysts expected. This is also the first quarterly loss for the Swiss lender in almost six years.
However, the company’s shares rose higher in both Europe and the US as investors overlooked the major loss that is mostly tied to UBS’s shock acquisition of its rival Credit Suisse earlier this year. In fact, investors saw many positives in the report.
To be more specific, the results showed that after a set of challenges brought on by the Credit Suisse deal, UBS’s core operations are recovering. Excluding the impact of the acquisition, the lender’s pretax income would have been $844 billion, its executives said.
More importantly, the report demonstrated significant strength in UBS’s wealth management division. Notably, the wealth management unit generated $18 billion in net money, and many of those rich customers are now returning to the rescued Credit Suisse as well.
In Q4 2022, wealth management clients withdrew $95 billion in net assets from Credit Suisse. For comparison, they now brought back $3 billion. Regarding Swiss business, in particular, both banks saw growth in deposits despite intensifying competition.
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UBS-Credit Suisse Deal
Not long after the 2023 banking crisis, UBS completed the emergency takeover of the troubled rival Credit Suisse in June, becoming a Swiss banking giant with almost $1.7 trillion in assets.
The move, the biggest banking tie-up since the 2008 global financial crisis, saw UBS acquire Credit Suisse for a bargain price of 3 billion Swiss francs ($3.25 billion) in a bailout deal orchestrated by Swiss authorities to prevent a banking sector breakdown. Switzerland’s government said that allowing Credit Suisse to collapse would have probably triggered an international financial crisis.
However, although UBS bought Credit Suisse at a heavy discount and secured a one-off gain of $29 billion, the merger caused numerous headaches for the Zurich-based bank. These include significant integration costs of around $2 billion and the day-to-day operations of an unprofitable bank. This resulted in a substantial loss in UBS’s “noncore and legacy” division,” which contains numerous positions and businesses the bank wants to eliminate.
Do you think UBS will return to profitability in the coming quarters? Let us know in the comments below.