UBS’s Takeover of Credit Suisse Was a Steal. Now Comes the Bumpy Part.
UBS’s first loss in nearly six years shouldn’t make investors take their eyes off the road. While the Swiss bank said Tuesday that third-quarter net income was a negative $785 million—almost twice as large as the median analyst forecast—its shares rose about 3% in early trading. Investors are wise to look through the fog and see that this was another set of encouraging figures.
Yes, the one-off gain of $29 billion that resulted from UBS buying its rival Credit Suisse at far-below book value is now in the rear window, having been recorded in the second quarter. What is left now is the unpleasant bit: integration costs, which were a steeper-than-expected $2 billion, and the day-to-day operations of a bank that was unprofitable when it was acquired and remains so. This resulted in a big loss in the new “noncore and legacy" division, which contains the positions and businesses UBS wants to dispose of.
Under the hood, however, the engine is already coming back to life. Excluding the impact of the acquisition, the bank’s pretax income would have been $844 million, executives said. An even more important gauge of health is the wealth-management division—the cornerstone of any Swiss bank.
Rich customers added $18 billion in net money to the UBS side of the business, and they are also returning to Credit Suisse. The bleeding that imperiled the latter bank’s very existence before its rescue takeover has been stopped even before both businesses are fully merged. In the final quarter of 2022, wealth-management clients pulled an eye-watering $95 billion in net assets from Credit Suisse.
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