UBS has reported a significant uptick in its third-quarter performance, driven by cost-cutting and robust loan income. The bank's total revenue reached $12.33 billion, beating the market expectation of $11.46 billion and marking a 5.4% increase compared to the previous year. Net profit surged to $1.43 billion, nearly doubling analysts' forecasts of $783.3 million, and showing remarkable improvement from last year’s loss of $715 million.
Despite a 15% year-over-year decline, net interest income stood at $1.79 billion, exceeding the anticipated $1.48 billion. Earnings per share also outperformed market predictions, reaching $0.43. According to CEO Sergio Ermotti, these robust results were achieved amid a "highly volatile and turbulent" market environment.
UBS is facing uncertainties due to geopolitical tensions and the upcoming U.S. elections, which could impact macroeconomic conditions. The bank anticipates a decline in interest income in Q4, alongside a seasonal rise in costs.
The integration of former rival Credit Suisse is a major ongoing effort for UBS, involving complex IT system amalgamation and the migration of customer accounts. The initial phase of customer account transfers has been completed, though the entire process is expected to take around 18 months.
Amidst political scrutiny of the crisis in Switzerland, UBS’s future capital levels face high uncertainty, with potential capital requirements increasing by up to $25 billion. UBS, which experienced losses over the last two quarters due to the acquisition of Credit Suisse, aims to return to profitability by Q1 2024. So far this year, the bank’s stock has risen by approximately 8%.
While the bank’s Common Equity Tier 1 (CET1) capital ratio has decreased by 0.6% to 14.3% due to a phased removal of regulatory benefits related to the Credit Suisse acquisition, UBS intends to proceed with a planned $1 billion share buyback by year-end. Looking ahead, Swiss regulatory reforms may impact its capital return plans post-2025.
