Volkswacht Bodensee - UBS posts $1.0 bn Q1 net profit, Credit Suisse takeover completion set for Q2

All eyes were on whether Switzerland's biggest bank is strong enough to carry through its forced alliance with Credit Suisse.

Analysts polled by the Swiss financial newswire AWP expected UBS's first quarter net profit to tick in at around $1.7 billion, down from $2.1 billion a year ago.

Though it managed to rack up a $1.0 billion net profit for the first three months of 2023, UBS said it had seen strong client inflows, as it prepared to integrate the country's second-largest bank.

"Our solid underlying performance and strong inflows this quarter demonstrate that we continue to be a source of stability for our clients during periods of significant uncertainty," returning chief executive Sergio Ermotti said in a statement.

"Our balance sheet for all seasons and a diversified and capital-generative business model allowed us to be part of the solution in a critical moment for the Swiss and global financial systems.”

Credit Suisse revealed Monday that nearly $70 billion had been withdrawn from the bank in the first three months of 2023 alone, publishing perhaps its final quarterly results ahead of the merger.

Most of the withdrawals were made in panic around the March 19 announcement that UBS had been strongarmed by Swiss authorities into a $3.25-billion shotgun marriage to ensure its smaller, but still "too-big-to-fail" rival, did not go bankrupt.

"We are focused on completing the acquisition of Credit Suisse, most likely in the second quarter of 2023," UBS said.

"While acknowledging the magnitude of, and complexity associated with, the integration and restructuring of Credit Suisse, we believe that this combination presents a unique opportunity to bring significant, long-term value to all of our stakeholders."

- Credit Suisse on the slide -

UBS chairman Colm Kelleher acknowledged during the bank's annual general meeting earlier this month that the merger came with huge risks attached.

To ensure things go smoothly, the bank brought back former chief executive Ermotti, who left in 2020, to oversee the takeover.

The 62-year-old, silver-haired banker spent nine years at UBS's helm, restoring its reputation after its bailout by the Swiss government and the central bank during the 2008 global financial crisis, as well as the $2.3 billion in losses racked up by a rogue trader in 2011.

UBS has also created a special risk management post focused exclusively on the merger and said Monday that its current head of overall risk management would prolong his mandate to help usher through the extremely delicate operation.

Credit Suisse revealed Monday the desperate situation it found itself in when the takeover deal was pushed through, with its results clearly speaking to the challenges ahead for UBS.

The bank said it saw 61.2 billion Swiss francs ($68.6 billion) withdrawn in the first quarter of 2023 alone, following on the heels of 110.5 billion Swiss francs in withdrawals in the fourth quarter last year.

While Credit Suisse said those outflows had "moderated", it acknowledged they "have not yet reversed".

Credit Suisse reported deceptively-bloated net profits for the first quarter, that swelled to 12.4 billion Swiss francs ($14 billion), up from a significant loss a year earlier.

But that was largely attributed to holders of high-risk Credit Suisse debt being wiped out in the emergency takeover deal.

It warned of "substantial" losses to come.

Credit Suisse hosted no press conference, so questions are "likely to be directed to UBS's management" later Tuesday, Flora Bocahut, an analyst at the US investment bank Jefferies, said in a research note.

H.Seidel--BTB