UBS Begins Next Act in Credit Suisse Merger
Bank kept attracting rich clients after buying troubled rival in March
UBS UBS 0.60%increase; green up pointing triangle booked a record $29 billion net profit last quarter after it integrated Credit Suisse into its books. But the gargantuan gain comes with an equally large challenge to meld the banking giants.
On Thursday, UBS provided a clearer picture of its future form, saying it will keep Credit Suisse’s large domestic arm in Switzerland rather than spin it off. It also showed strong inflows from rich clients, a sign that the world’s wealthy haven’t been turned off by the deal.
The large net profit reflected Credit Suisse’s knockdown price. UBS paid $3.8 billion in stock for the smaller bank, while acquiring additional equity via a $29 billion accounting gain. That type of gain occurs when a company buys assets for less than they are worth—typically in a distressed situation.
UBS bought its smaller rival in a Swiss government-engineered rescue in March, putting it in control of much of the country’s lending and deposits. On Thursday, UBS said it expects to make more recurring net fee income this year from customers who are adding more assets and rising market valuations.
Credit Suisse officially became part of UBS in June. UBS’s quarterly results included Credit Suisse as of June 1. On its own, Credit Suisse’s quarterly loss was around $10.6 billion.
Rich clients added $16 billion in net new assets at UBS in the second quarter, after a $28 billion inflow in the first quarter. The new money offset some of the cash leaving Credit Suisse, which since last October has handed back $200 billion to customers, including around $44 billion in the second quarter. The inflows and outflows are being closely watched by investors to project UBS’s future earnings power.
UBS said it decided to keep and integrate Credit Suisse’s bank in Switzerland, after considering alternatives to appease Swiss politicians who want to keep two big banks in the country. Before the combination, they employed around 37,000 in Switzerland.
The acquisition is the largest combination of financial institutions since the financial crisis and enlarges UBS’s already hefty role in managing the wealth of the world’s rich. By adding Credit Suisse, UBS manages around $5 trillion in client-invested assets.
UBS’s purchase marked the end of Credit Suisse’s 167 years of independence and came after the smaller bank lurched from crisis to crisis. Customers started fleeing last year and a last-ditch plan to restructure ran out of time. In March, Credit Suisse had to go on central-bank life support to keep meeting customer withdrawals and was bought by UBS a few days later.
UBS said it expects the integration to be largely complete by the end of 2026.