Swiss banking giant UBS Group has reported third-quarter results that surpass analyst expectations, with net profit significantly exceeding forecasts. The Zurich-based bank warned of potential challenges ahead, citing uncertainties such as the U.S. election and declining interest income. The latest financial report shows a net profit of $1.4 billion, nearly double the $783 million analysts had predicted. This success is attributed to profit expansion post the Credit Suisse acquisition, a robust growth in loan profits, and progress in cost reductions.
Despite the strong Q3 performance, UBS expressed concerns about the unclear macroeconomic outlook in regions outside the U.S., influenced by geopolitical tensions and election risks. The bank anticipates potential declines in interest income in the fourth quarter, alongside seasonal cost increases.
CEO Sergio Ermotti noted that the results were achieved amid market volatility and confirmed plans to complete a $1 billion stock buyback by the end of 2024. UBS continues to integrate former competitor Credit Suisse smoothly, with its high-net-worth assets contributing to profit growth. Following UBS's takeover of Credit Suisse during a liquidity crisis last year, regulatory scrutiny in Switzerland remains, potentially requiring an additional $25 billion in capital.
UBS shares have risen about 10% this year in the U.S., rebounding from significant losses in 2023 due to the merger with Credit Suisse. The better-than-expected Q3 performance temporarily boosted the stock price by over 7% in after-hours trading.
The bank's decision to gradually eliminate regulatory benefits linked to the Credit Suisse acquisition led to a 60-basis-point drop in its CET1 capital ratio, now at 14.3%. This did not affect the planned stock buyback, though future capital return plans might be influenced by Swiss regulatory reforms.
UBS's core global wealth management division reported higher-than-expected pre-tax profit, driven by fee income growth that offset lower interest income. Pre-tax profit for Q3 was $1.085 billion, up from $871 million last quarter and $926 million a year earlier. The division saw net new assets of $25 billion, aligning with market expectations but slightly lower than the previous quarter.
The investment banking division posted a pre-tax profit of approximately $405 million, surpassing the analyst consensus of $174 million, recovering from a $254 million loss in the same period last year. Increases in revenue from trading and market activities contributed to this result.
The unit handling Credit Suisse's bad assets reported a pre-tax loss of around $603 million, better than market expectations.
The Swiss parliament is expected to release the investigation results of Credit Suisse's liquidity crisis by the end of the year, potentially influencing new regulatory and legislative measures. FINMA, the Swiss financial regulator, indicated that UBS, having grown in size and complexity after merging with Credit Suisse, needs to revise its emergency and resolution plans.
UBS Chairman Colm Kelleher mentioned plans to expand U.S. financial operations by acquiring a well-known wealth management firm once the integration with Credit Suisse is complete.
