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UBS Set to Report Q2 Earnings: What to Expect After Credit Suisse Acquisition




UBS Set to Report Second-Quarter Earnings

UBS Set to Report Second-Quarter Earnings

Introduction

UBS is set to report second-quarter earnings on Thursday, the first long-awaited results from Switzerland’s largest bank since it acquired rival Credit Suisse in a blockbuster deal that rocked the Swiss banking sector earlier this year.

Much attention will be paid to layoff plans and the fate of the Swiss division of Credit Suisse, around which there has been a lot of speculation in recent months.

Merger Implications

The Swiss authorities pushed UBS into a $3.25 billion takeover on March 19, 2023 to prevent the collapse of its closest competitor, fearing catastrophic consequences for the global financial system.

But since the complicated merger was finalized in June, UBS has revealed little about its plans, while questions abound about the implications of the deal.

“The list is long, and he will, in particular, be looking for details about the retention of Credit Suisse employees and customers, and whether the bank will publish a timetable for the merger,” Andreas Vendetti, an analyst at Swiss investment management firm Vontobel, told AFP.

Vendetti also said that this time the focus will not be on UBS’s bottom line, which is usually a key indicator of how a bank is doing, as it will be influenced by a number of exceptional factors.

Exceptional Income

UBS indicated that the results would include an exceptional accounting gain of around $35 billion due to the difference between the purchase price and the net assets recognized by Credit Suisse, and stated that it would also include Credit Suisse’s less than a month’s integrated results, giving profit difficult to assess.

While little was announced about Credit Suisse’s results, the weekly newspaper SonntagsZeitung quoted people familiar with the bank as saying that the bank suffered a loss of 3.5 billion Swiss francs ($4 billion) in the second quarter.

Analysts at Zurich Cantonal Bank expect interest in the results of UBS’s private operations to come “in second place”, noting in a research note that the focus will be on “details of integration” between the two banks.

The note predicted that investors would be particularly keen on the outflow of funds as they look for signs of customer confidence in the newly merged giant.

Real Cost

“We will be closely monitoring post-merger earnings, additional integration plans, job cuts and what the bank is doing with its Swiss banking arm,” Ipek Ozkardska, an analyst at Swissquote Bank, told AFP.

She added that the results themselves “of course, after the merger, are expected to be strong. However, investors will be watching to see if this forced marriage creates real value for the giant bank UBS.”

Analysts were particularly concerned about speculation about the fate of Credit Suisse’s Swiss division, as well as questions about whether it could continue to operate independently due to significant duplication of UBS operations in Switzerland.

Bloomberg reported last week, citing unnamed sources, that UBS is leaning toward full integration with local bank Credit Suisse rather than leaving it as a standalone unit. This indicates that significant job cuts can be expected.

A source familiar with the situation told AFP that the first wave of layoffs had already begun at Credit Suisse, while Financial News reported that 200 investment bankers had already been asked to leave.

Meanwhile, observers noted recent positive developments for UBS, including the settlement of US lawsuits related to the 2008 global financial crisis.

The bank also announced this month that it would not need the billions offered by the Swiss government and central bank to continue its takeover of Credit Suisse.

Benjamin Gee, an analyst at Deutsche Bank, wrote in a note that UPS appeared to be sailing “on a calm sea of good news and not facing a storm.”

The Swiss Competition Commission told AFP that it is still looking into the merger and expects to give its opinion “at the end of September”.


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Adrian Ovalle
Adrian Ovalle
Adrian is working as the Editor at World Weekly News. He tries to provide our readers with the fastest news from all around the world before anywhere else.

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