UBS Completes Initial Integration of Credit Suisse, Eyes Strong Growth

On Tuesday, UBS announced the completion of the initial phase of integrating fallen rival Credit Suisse, revealing positive net new asset flows and ambitious financial targets for the future. 

The Swiss bank also disclosed plans to recommence share buybacks in the latter half of the year, with up to $1 billion earmarked for 2024.

Strategic Goals and Financial Targets:

UBS reaffirmed its key financial objectives and introduced new targets, including a goal for its wealth management division to elevate invested assets to $5 trillion by 2028, up from the current $3.85 trillion. 

Additionally, the bank aims to attract net new assets of $200 billion annually by 2028, with $77 billion already entrusted by clients since the acquisition.

CEO Sergio Ermotti emphasized the bank’s commitment to sustainable long-term growth and higher returns, leveraging enhanced scale and capabilities across leading client franchises and improved resource discipline.

Financial Highlights and Initiatives:

UBS proposed a dividend of $0.70 per share for 2023, representing a 27% increase. It also revealed plans to achieve $13 billion in cost savings by the end of 2026, with half expected by the conclusion of this year. 

Despite incurring a net loss of $279 million in the fourth quarter due to absorbing Credit Suisse, UBS is poised to restart share buybacks post-merger finalization.

The investment bank noted a pretax loss of $169 million but anticipates a return to profitability in the first quarter, driven by improving market activity, a growing banking pipeline, and advanced progress on integration efforts.

Integration Challenges and Client Migration:

UBS has managed to navigate the merger process without major disruptions, witnessing a notable surge in its share price. However, challenges persist, particularly in integrating IT systems and legal entities. 

The bank is gearing up to transition Credit Suisse clients, with those in Singapore, Hong Kong, and Luxembourg slated as the initial cohort.

Regulatory Scrutiny and Risk Management:

Concerns loom regarding potential friction with regulators, given the bank’s significant size and dominance in critical sectors like domestic commercial lending. 

UBS’s balance sheet has expanded substantially, prompting scrutiny over potential risks to the Swiss economy. 

Nonetheless, UBS contends that its focus on balance sheet composition, with significant holdings in highly liquid assets and low-risk mortgages, mitigates systemic risk concerns.