Zurich, Switzerland– UBS will unveil hugely-anticipated quarterly results Thursday, with most focus on plans for its recently-swallowed rival Credit Suisse — and particularly the fate of its investment bank and domestic business.
UBS’s second-quarter income statement will mark the first results presented since the mega-merger that rocked Swiss banking earlier this year.
Analysts have said UBS’s own operating results will surely “take a backseat” to interest in how the integration process is proceeding.
Particularly keen attention will be paid to expected cuts at Credit Suisse’s investment bank, at the heart of multiple scandals and crises that preceded its demise.
Investors and employees alike are also eager for clues as to the fate of Credit Suisse’s Swiss division, as well as what level of job cuts to expect.
Swiss authorities strongarmed UBS into the $3.25-billion takeover on March 19 to prevent its closest domestic rival from going under — which could have had catastrophic consequences for the global financial system.
Distorted
The gigantic merger means that UBS’s operational result numbers will be heavily distorted by a string of exceptional items.
UBS has already indicated that the results should include an exceptional accounting gain of nearly $35 billion due to the difference between the purchase price and the recognised value of Credit Suisse’s assets.
The income statement will also include less than a month of integrated Credit Suisse results, making any profit estimates difficult, analysts have warned.
The merger combines two banks pulling in diametrically different directions.
While Credit Suisse in recent years has been racking up towering losses, posting a massive 7.3-billion Swiss franc ($8.3 billion) net loss in 2022, UBS posted a $7.6 billion net profit.
And the losses have reportedly continued for Credit Suisse, with the SonntagsZeitung weekly citing insiders at the bank suggesting it was 3.5 billion Swiss francs ($4 billion) in the red during the second quarter.
UBS meanwhile has continued to project strength, announcing earlier this month that it does not need the billions in support offered by the Swiss government and the central bank to go through with the takeover.
Cleaning house
UBS is now tasked with cleaning house to smooth the integration.
It has already begun paying for its former rival’s mistakes.
In July, it dished out $387 million to cover a fine imposed by the US Federal Reserve and the Bank of England over Credit Suisse’s failure to adequately manage the risk posed by the US investment fund Archegos, whose dramatic implosion cost the bank $5.5 billion in losses.
In another apparent sign of looming changes at the investment bank, Credit Suisse sent a letter to investment clients, seen by AFP on Wednesday, indicating it would “reduce its volume of new business from September 22”, and had begun redirecting its investment clients to UBS for all market activities.
As rumours have swirled in recent months, there has also been intense speculation around the fate of Credit Suisse’s Swiss unit, with questions over whether it could continue to operate independently due to the significant overlap with UBS’s business in Switzerland.
Last week, the Bloomberg financial news agency, citing unidentified sources, reported that UBS was leaning towards a full integration of Credit Suisse’s domestic bank, rather than spinning it off.
“If there’s a full integration, there will be of course a big restructuring of the business in Switzerland,” Andreas Venditti, an analyst at Swiss investment manager Vontobel, told AFP.
That suggests that significant job cuts could be expected at the combined banks, which jointly counted around 120,000 staff worldwide at the end of 2022, including 37,000 in Switzerland.
A source close to the matter told AFP that a first wave of layoffs has already begun at Credit Suisse, while the Financial News website reported that 200 investment bankers had already been asked to leave.