UBS breaks industry record with $29bn profit after Credit Suisse takeover

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UBS has reported the biggest ever quarterly profit for a bank, after recording a $29bn gain linked to its takeover of Credit Suisse.

The Swiss lender announced the figures on Thursday as it said it would press ahead with absorbing Credit Suisse’s domestic business despite local and political opposition to a deal expected to result in thousands of job cuts and branch closures.

UBS agreed to rescue its ailing rival five months ago and its record $29bn pre-tax profit was almost entirely thanks to the accounting gain it recorded on the takeover.

It said that Credit Suisse’s domestic business would be run separately until it is legally combined with UBS next year.

UBS added that the two Swiss entities would be fully integrated by 2025, at which point it would end all Credit Suisse’s domestic sponsorship commitments.

The two groups’ international businesses are already being combined and Credit Suisse reported an overall SFr9.3bn ($10.6bn) pre-tax loss for the second quarter as customers withdrew SFr39bn.

UBS’s decision to absorb Credit Suisse’s domestic business and eliminate branding for the bank that dates back 167 years has been one of the most contentious parts of the takeover, which is the first time two global systemically important financial institutions are to be combined.

A public poll, shortly after the takeover was agreed in March, showed three-quarters of Swiss citizens opposed UBS merging its domestic business with its former rival.

Switzerland is preparing for national elections in October and the impact of the merger of two of the country’s biggest companies is a central issue.

“Our decision on Credit Suisse [Switzerland] . . . follows a thorough evaluation of all available options,” UBS chief executive Sergio Ermotti said on Thursday. “Our analysis clearly shows that full integration is the best outcome for UBS, our stakeholders and the Swiss economy.”

UBS also announced that it planned to have substantially completed its integration of the wider Credit Suisse group by 2026, by which time it intends to have cut $10bn of costs.

In a call with analysts on Thursday morning, Ermotti said UBS planned to make 3,000 redundancies in Switzerland in the coming years, though most of the job losses would be through staff retiring or leaving and not being replaced.

Excluding the accounting gain from the Credit Suisse deal, UBS recorded a $1.1bn pre-tax profit for the quarter.

Its latest results also reported a 4 per cent year-on-year fall in wealth management profit, a 54 per cent rise in retail and corporate banking profit, a 91 per cent drop in asset management profit — mainly due to the sale of a stake in a fund manager last year — and a 66 per cent drop in investment banking profits.

The results had been pushed back by five weeks to allow UBS to formulate its plan for Credit Suisse.

In recent weeks, UBS has been clearing up legacy legal and regulatory disputes.

This month, it agreed to pay $1.4bn to resolve a US regulatory probe into the alleged mis-selling of residential mortgage bonds in the run-up to the 2008 financial crisis, wrapping up the last remaining case brought by the US government against big banks over the issue.

UBS also made clear it did not intend to use a SFr9bn backstop from the Swiss government designed to shield it from losses following the Credit Suisse acquisition.

It has also terminated a SFr100bn liquidity lifeline offered by the Swiss National Bank at the height of turmoil that swept the banking sector in the spring and culminated in the Credit Suisse takeover.

Since agreeing to rescue Credit Suisse in March, UBS shares have risen 30 per cent. The Euro Stoxx Banks Index that tracks European lenders is up 16 per cent over the same period.

UBS shares rose 6 per cent on Thursday morning, to their highest level since 2008.