UBS reports Q4 loss, layoffs, and cost cuts amid integration
UBS has posted a loss for the final quarter of 2023 due to the takeover of Credit Suisse, but achieved a record accounting profit for the year as a whole. However, the big bank is making progress with the integration of the two banks.
The new UBS Group posted a loss of $279 million in the 2023 fourth quarter, as announced on Tuesday. This is the second quarter in which the acquired Credit Suisse is fully included. In the third quarter, UBS reported a loss of $785 million.
The pre-tax loss totalled $751 million, including a loss of $508 million in connection with the investment in SIX Group, according to the press release. On an adjusted basis, UBS is forecasting a pre-tax profit of $592 million for the period from October to December 2023.
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Meanwhile, UBS is reporting a record profit of $29.0 billion for the full year 2023, although this is related to the acquisition of Credit Suisse. This led to so-called negative goodwill, which refers to a bargain purchase amount of money paid when a company acquires another company or its assets, of $28.9 billion, as the purchase price was significantly lower than the book value of the second-largest Swiss bank at the time.
Distribution to shareholders
The combined bank has further reduced costs. According to the information provided, costs totalling around $4 billion had already been saved by the end of the 2023 financial year compared to 2022. A further 4,300 jobs were cut in the fourth quarter of 2023. The number of full-time positions at the combined bank of UBS and CS totalled around 113,000 at the end of December, with an additional 25,000 external employees.
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The bank aims to save $13 billion on an annual basis by 2026, it specified on Tuesday. UBS had previously put its target for cost savings at more than $10 billion by the end of 2026. Half of the targeted gross savings should already be achieved by the end of 2024.
Integration costs totalled just under $1.8 billion in the fourth quarter. Overall, UBS expects integration costs to total around $13 billion by the end of 2026. Around two thirds of this would be incurred by the end of 2024.
UBS shareholders are now to receive a 27% higher dividend of $0.70 per share for 2023. In addition, the share buybacks, which are currently on hold due to the CS takeover, are to be resumed in the second half of 2024 – probably in the amount of up to $1 billion in the current year.
The bank also intends to return a large amount of capital to shareholders in the coming years, including during the integration process. For the current year 2024, for example, it is planning to increase the dividend per share by a mid-teens percentage. In addition, share buybacks in the 2026 financial year are expected to be above the level of 2022, when UBS returned $5.6 billion of capital to its shareholders through share buybacks.
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Credit Suisse business stabilised
The first phase of the integration has been completed, it was announced on Tuesday. “We have been able to stabilise Credit Suisse’s business and have made enormous progress with the integration,” said UBS CEO Sergio Ermotti in a statement. The path over the next few years will not always be straightforward, but the strategy is clear.
The high level of client confidence in the bank is reflected in the inflow of assets: UBS recorded a net new money inflow of $22 billion dollars in its core business – global wealth management – in the fourth quarter. Since the completion of the CS takeover, the figure in this area has been $77 billion, and client deposits have since flowed back in the same order of magnitude.
In total, UBS managed assets totalling $3,850 billion in Global Wealth Management (GWM) at the end of December. It aims to increase this to over $5,000 billion by 2028.
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Group-wide assets under management, including Asset Management and the Swiss business, totalled $5,714 billion at the end of December. At the end of September, the figure was $5,373 billion.
Merger of Swiss business in the third quarter
As usual, UBS is rather cautious about the future, especially as the exact interest rate trend and the course of geopolitical tensions are unclear. However, seasonal factors are likely to have a positive impact on earnings in the first quarter.
The big bank is now focussing on the reduction of further assets and business areas from which UBS intends to exit, as well as the further reduction of costs. Those CS businesses that the Group does not wish to retain have been combined in a “bad bank” called “Non-Core and Legacy”. The adjusted pre-tax loss in the run-off unit is expected to amount to around $1 billion dollars by the end of 2026.
The next big step is therefore also the merger of the legal merger of UBS AG and Credit Suisse AG. The big bank expects this to take place by the end of the second quarter of 2024. In Switzerland, the merger of the two local companies is expected to take place before the end of the third quarter, according to reports.
Translated from German by DeepL/amva
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