UBS posts first quarterly loss since 2017 on Credit Suisse costs

ZURICH, Switzerland  -Swiss banking giant UBS posted a larger-than-expected loss in the third quarter on Tuesday, the first quarterly drop since 2017 as it integrates fallen rival Credit Suisse.

UBS said the net loss in the third quarter stood at $785 million (732 million euros). Analysts surveyed by the AWP news agency had been expecting a smaller loss of $430 million.

The last time Switzerland’s largest bank was in the red was in the fourth quarter of 2017.

UBS, however, said that it had “now stabilized Credit Suisse and continued to grow our franchise” as it raked in $22 billion in net new money into its wealth management business in the quarter.

UBS was strongarmed by Swiss authorities into buying Credit Suisse for $3.25 billion in March over concerns that its domestic rival could go under and spark a global financial crisis.

READ: UBS swallows doomed Credit Suisse, casting shadow over Switzerland

At the time, investors had gasped at the risks UBS was taking on with the purchase.

But by August, the bank said it would not need the billions in support offered by the Swiss government and central bank to offset any surprises that might pop up in its stricken rival’s accounts.

UBS said that the third quarter included integration-related expenses of $2 billion between July and September.

The bank said it had offered $500 million to “selected employees” of Credit Suisse prior to the acquisition in order to convince them to stay on board but disclosed that the combined group’s headcount was down by 13,000.

UBS Chief Executive Officer Sergio Ermotti said in a call with analysts that the bank was in “full execution mode” regarding the integration of Credit Suisse.

“At the same time we are planning for the future,” he said. “The next milestone is to prepare the three-year plan that we will present in February.”

‘Clear progress’

Despite the loss, UBS shares jumped 4 percent, then pared gains to end the day up 1.8 percent on the Swiss stock exchange as analysts said the bank’s overall results were positive.

The bank reported an underlying profit before tax of $800 million.

Credit Suisse posted a positive inflow of net new money for the first time since the first quarter of 2022 at $3 billion.

UBS also said net new deposits totaled $33 billion, with $22 billion coming from Credit Suisse clients.

Analysts said UBS has considerable work ahead of it.

“UBS has started its restructuring process in earnest, but this is just the start,” said analysts at Dutch bank ING.

“UBS has made clear progress since the close of the deal — but it continues to face a huge task,” said Andreas Venditti, analyst at Vontobel wealth management firm.

The challenges include retaining clients and key staff along with deep restructuring and cost cutting, he said.

“This will require significant time and management attention,” Venditti said.

Job cuts

UBS said in August it plans to fully absorb Credit Suisse’s century-old Swiss division and slash thousands of jobs across the country.

READ: UBS to absorb Credit Suisse domestic unit, eyes 3,000 job cuts

It aims to complete most of the integration by the end of 2026, with more than $10 billion in cost savings by then.

UBS said Tuesday that the combined headcount of the two banks was down by 13,000 compared to the end of last year. The number of personnel totaled almost 116,000 at the end of the third quarter.

“We can’t keep everybody,” Ermotti said in telephone news conference.

“We need to achieve massive costs savings,” he said. “Credit Suisse is structurally loss-making and we need to take action.”