By Dave Graham
ZURICH (Reuters) – UBS Group on Wednesday posted third-quarter revenue effectively above forecasts, pushed by greater income and price reductions, and accomplished a primary wave of shopper migrations from Credit score Suisse since buying its former rival final yr.
Internet revenue attributable to shareholders at Switzerland’s largest financial institution was $1.4 billion, almost double the $740 million estimated by analysts in a company-provided ballot. Complete income got here in at $12.3 billion, beating the $11.5 billion consensus.
However the financial institution’s shares closed down 4.5%, giving up early positive aspects of almost 4%, after taking successful on account of uncertainty about regulatory modifications, the broader outlook, and the way a lot spare capital the financial institution would have going into subsequent yr.
UBS CEO Sergio Ermotti hailed the financial institution’s income development and highlighted what he known as sturdy shopper momentum, significantly within the Americas and in Asia Pacific.
“However there isn’t any room for complacency. We’re nearly midway to restoring pre-acquisition ranges of income and returns on capital,” he instructed an analyst name.
Markets are ready to see how robust Swiss authorities shall be with new rules for the financial institution, significantly on capital.
The federal government needs UBS and different systemically vital banks to carry extra capital to stop the danger of one other Credit score Suisse-style collapse. It needs to issue into its proposals the findings of a parliamentary report into the demise of Credit score Suisse on account of be revealed earlier than the top of 2024.
Ermotti mentioned in August he anticipated the regulatory outlook to turn out to be clearer across the flip of the yr. However on Wednesday he mentioned it was impossible he would have rather more readability by February and that UBS was “probably not in charge of the timing”.
Andreas Venditti, an analyst at Vontobel, mentioned these remarks had in all probability helped push UBS shares into the pink.
“The market doesn’t like that the regulatory uncertainty may last more than some might need hoped,” he mentioned.
UBS was in technical discussions with the federal government however was but to succeed in a part “the place you get any suggestions”, Ermotti mentioned.
COST REDUCTIONS
UBS’s funding financial institution delivered an working revenue twice as excessive because the consensus forecast supplied by the financial institution, whereas losses on the non-core and legacy unit, which handles undesirable Credit score Suisse belongings, had been beneath expectations.
UBS mentioned it was progressing effectively with value discount plans and now expects to attain a determine of round $7.5 billion this yr. Beforehand it had forecast round $7 billion.
UBS has begun transferring shoppers from Credit score Suisse on to its personal platforms, and the financial institution accomplished the primary part of shopper account migrations in Luxembourg and Hong Kong throughout October.
Singapore and Japan had been anticipated by year-end and Switzerland will comply with subsequent yr, the financial institution mentioned. Ermotti mentioned he expects the method to final about 18 months.
On the fourth quarter, UBS mentioned “ongoing geopolitical conflicts and the upcoming U.S. elections are creating uncertainties which can be more likely to have an effect on investor behaviour.”
In Could, UBS formally accomplished the merger with Credit score Suisse. Ermotti mentioned final month that UBS’s integration of its former competitor was operating forward of schedule.
Because of that progress, UBS accelerated amortization of a capital adjustment linked to the Credit score Suisse acquisition that impacts widespread fairness tier 1 capital (CET1) ratios. That meant UBS’s CET1 capital ratio – a measure of economic power – now stood at 14.3%, down from 14.9% within the earlier quarter.
Citi analyst Andrew Coombs mentioned that change and new Basel capital guidelines coming into power in January meant that UBS now had little or no extra capital right now relative to its round 14% goal, “so any (share) buyback subsequent yr will now have to come back out of natural capital technology, which limits the scope.”
On high of that, Coombs mentioned, was the continuing uncertainty surrounding the principles on capital necessities.
UBS mentioned it stays dedicated to its dividend and buyback ambitions for 2025 and 2026.