2023-08-31 07:44:42 ET
UBS ( NYSE: UBS ) ordinary shares rose 6.0% in Zurich trading on Thursday after it said it will cut more than $10B in costs and eliminate 3,000 jobs in Switzerland as part of its plan to fully integrate Credit Suisse's Swiss Bank into its operations.
The company had been considering spinning off the unit. "Our analysis clearly shows that full integration is the best outcome for UBS, our stakeholders and the Swiss economy," said UBS CEO Sergio Ermotti in a statement. "Our stronger capital base will enable us to keep the combined lending exposures unchanged, while maintaining our risk discipline."
In a memo to staff, he said the company would cut 3,000 Swiss jobs, and that more people would leave voluntarily, such as through retirement, Reuters reported.
UBS ( UBS ) and Credit Suisse's Swiss Bank will operate separately until their planned legal merger in 2024. Meanwhile, the Credit Suisse brand and operations will remain in place until UBS completes the migration of clients to its system, which is expected in 2025.
The combined bank expects to achieve exit-rate cost savings of more than $10B by the end of 2026, the same time it expects to complete the integration. It expects cumulative integration-related expenses to be broadly offset by accretion-to-par effects of ~$12B related to fair value adjustments applied to amortized-cost financial instruments.
Excluding integration-related expenses and accretion-to-par effects, UBS ( UBS ) targets an exit rate cost income ratio of less than 70% by the end of 2026 and to progress toward a 2026 exit rate return on CET1 capital of ~15%.
Q3 2023 underlying profit before tax for UBS Group ( UBS ) is expected to be about breakeven with positive underlying profit before tax for H2 2023.
"We expect positive net new asset flows in our wealth and asset management franchises, and higher asset valuations are also expected to have a positive impact on our recurring net fee income year on year," the company said in its outlook.
UBS has created a non-core and legacy (NCL) business division. That will include Credit Suisse positions and businesses that don't fit with UBS's strategy and policies, such as the assets and liablities of the Capital Release Unit (Credit Suisse) and the majority of asssets and liabilities of the Investment Bank (Credit Suisse), Wealth Managemement (Credit Suisse) and Asset Management (Credit Suisse). Also included are remaining assets and liabilities of UBS's NCL portfolio and smaller amounts of assets and liabilities of UBS business divisions that it deemed as nonstrategic.
As of June 30, 2023, the positions that will be included in NCL represented ~$55B of risk-weighted assets, excluding operational risk RWA, and $22B of leverage ratio denominator. About half of those RWA are expected to run off by the end of 2026. IT will actively reduce the assets of the NCL unit to reduce operating costs and financial resource consumption.
More on UBS
- UBS GAAP EPS of $8.99, revenue of $9.54B
-
UBS: The Thrill Of Risk And Potential Reward, But Wait For Earnings
- JPMorgan, Goldman, UBS agree to pay almost $500M to settle stock lending suit
- Seeking Alpha’s Quant Rating on UBS
- Earnings data for UBS
- Dividend scorecard for UBS
For further details see:
UBS to merge Credit Suisse's Swiss Bank into its own, cutting 3,000 jobs