UBS Posts Record $29 Billion Profit on Credit Suisse Deal
Credit Suisse into its books. But the gargantuan gain comes with an equally large challenge to meld the banking giants. On Thursday, UBS provided a clearer picture of its future form, saying it would keep Credit Suisse’s large domestic arm in Switzerland rather than spin it off.
It also showed strong inflows from rich clients, a sign that the world’s wealthy haven’t been turned off by the deal. UBS shares rose 6% and are now worth the most since just before it took a Swiss government bailout in October 2008. Investors increasingly view the combination—done in a moment of duress in March—as a significant opportunity for UBS to dominate the business of caring for the wealth of the global elite.
UBS shares are up 37% since the deal was struck. The large net profit reflected Credit Suisse’s knockdown price. UBS paid $3.8 billion in stock for the smaller bank, while acquiring additional equity via a $29 billion accounting gain.
That type of gain occurs when a company buys assets for less than they are worth—typically in a distressed situation. The quarterly profit, while a feature of the deal accounting, is the largest among any major developed-market bank ever, according to FactSet, beating the $14.47 billion haul earned by JPMorgan Chase last quarter. When UBS bought its smaller rival in a Swiss government-engineered rescue in March, it gained control of much of the country’s lending and deposits.
On Thursday, UBS said it expects its customers globally to keep adding assets, a positive for the steady fees that form the ballast of its earnings power. By adding Credit Suisse, UBS said it manages around $5.5 trillion in client-invested assets. Credit Suisse officially became part of UBS in June.
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