Swiss banking giant UBS on Thursday announced plans to save $10 billion in costs, including through 3,000 staff reductions in Switzerland in the approaching years, because it moves ahead with “full integration” of longtime rival Credit Suisse’s domestic operations following a takeover.
The announcement got here because the Zurich-based bank reported $29 billion in net and pre-tax profit within the second quarter, its first earnings release since the government-orchestrated merger to help stave off a possible global financial meltdown.
Underlying profit before taxes got here in at $1.1 billion, which excludes some $29 billion in negative goodwill, integration costs and other impacts of the takeover.
Goodwill is an accounting technique, and the figure stems from the difference between the $3.25 billion that UBS paid for Credit Suisse and the underlying value of its assets.
In a separate statement, Credit Suisse, calling itself a UBS subsidiary following the completion of the deal on June 12, announced a lack of 8.9 billion Swiss francs ($10.1 billion) because it wrapped up its accounting for all of 2023.
In a conference call with analysts, UBS chief executive Sergio Ermotti addressed one among the key outstanding questions: how a lot of Credit Suisse’s tens of hundreds of employees can be retained.
He said about 3,000 jobs can be eliminated, but not before late next 12 months. He pointed to “a quite healthy Swiss job market” — including in finance.
“Let me emphasize, the overwhelming majority of the fee reductions will come from natural attrition, retirements and internal mobility. Around 1,000 redundancies will result from the combination of Credit Suisse (Switzerland),” Ermotti said.
“As well as, the need to profoundly restructure other parts of Credit Suisse is predicted to lead to about 2,000 additional redundancies in Switzerland over the subsequent couple of years,” he added.
He defended and explained the hard-wrought decision for UBS to hold on to the Swiss operations of Credit Suisse as a substitute of spinning off or otherwise divesting them, citing the complexity of unraveling the domestic business from the worldwide bank, technology issues and other aspects.
UBS said it planned to “substantially complete” the combination of Credit Suisse’s operations by the tip of 2026 and to “achieve gross cost reductions of over $10 billion over that point.”
Ermotti trumpeted “formidable momentum” in deposits within the quarter, with $23 billion flowing in.
It included $18 billion to the wealth-management and Swiss bank operations of Credit Suisse, which was bleeding deposits amid a crisis of investor confidence late last 12 months and early this 12 months that led to its demise and marriage with UBS.
Investors appear pleased with the best way UBS has handled the deal.
Its shares are up about 35% this 12 months on the Swiss SIX stock exchange, including a 5% gain to 23.25 Swiss francs Thursday morning after the quarterly report.
Deutsche Bank analysts Benjamin Goy and Sharath Kumar wrote in a research note that the outcomes were “overall positive in our view.”
They pointed to their favorable rating on UBS shares.
“The underlying UBS business is seemingly not impacted by the deal,” the analysts said. “Clearly, the group stays a construction site within the near term, nevertheless we imagine this set of results and announcements should give confidence within the mid-term bull case. Buy.”
UBS said the 2 banks will operate individually until a planned legal merger next 12 months, and the Credit Suisse brand — with its storied yet recently troubled legacy in Swiss finance — would remain “until we complete the migration of clients to our system, which we expect in 2025.”