UBS, the Swiss bank, has announced impressive second-quarter results for its Global Wealth Management unit. The division brought in an astounding $16 billion in net new money, marking its highest second-quarter performance in over a decade.
In addition, UBS reported a record-breaking profit of $29 billion for the second quarter. The company also provided fresh insights into its acquisition of long-standing competitor, Credit Suisse. While both banks continue to operate separately, UBS plans to simplify its legal structures and merge the two businesses by 2024.
The integration of these global banking giants will have extensive implications, including the expansion and transformation of UBS’ wealth management operations. Currently, the majority of UBS’ wealth management business, which oversees $3 trillion in assets on behalf of clients, is focused on the United States. On the other hand, Credit Suisse does not have a presence in U.S. wealth management, but offers services in Switzerland, Asia, and other markets.
Although Credit Suisse experienced client and asset outflows earlier this year, UBS has reported that the franchise has now “broadly stabilized.” During the second quarter, Credit Suisse suffered net asset outflows of $30 billion but gained $14 billion in net new deposits.
Since the end of the second quarter, the combined wealth management businesses of UBS and Credit Suisse have already attracted an additional $8 billion in net new money.
With this acquisition, UBS has solidified its position as a wealth management powerhouse, now overseeing $3.7 trillion in invested assets. The bank’s concentration remains on serving high-net-worth and ultra-high-net-worth clients, making it the largest wealth manager in Switzerland, Asia, and Latin America.
During an earnings call, CEO Sergio Ermotti emphasized that this acquisition will strengthen UBS’ position as the only truly global wealth manager.
UBS Americas Wealth Unit Reports Decrease in Advisors
The Americas wealth unit at UBS saw a slight decline in the number of advisors at the end of the second quarter compared to the same period last year. The unit, which includes advisors in Canada, the U.S., and Latin America, had 6,071 advisors, down from 6,139. While UBS Global Wealth Management experienced a net gain in client money during the second quarter, the Americas unit reported net outflows of $3.4 billion. UBS attributed this to seasonal tax outflows.
Decline in Pretax Profit for Global Wealth Management Unit
UBS’s Global Wealth Management unit saw a 4% decrease in pretax profit compared to the same period last year due to elevated expenses. The unit posted $1.11 billion in pretax profit.
UBS Provides Integration Details, Including Cost-Savings
On Thursday, UBS revealed new details about its integration plans, which include layoffs and an upward revision of expected cost-savings from $8 billion to $10 billion. The company also made the decision to retain Credit Suisse’s domestic Swiss banking operations. This strategic move grants UBS significant market share in Switzerland and expands its customer base to include both mass affluent and ultrawealthy individuals.
UBS CEO Sergio Ermotti explained that retaining the Swiss bank as part of UBS made more sense for both the firm and its clients compared to other options, such as a spin-off. He emphasized that being part of UBS ensures continued support from one of the most trusted and stable global franchises. With this decision, UBS will have the third-largest bank branch network in Switzerland.
Positive Market Response to Integration Plans
Investors responded positively to UBS’s integration plans, as shares of UBS (ticker: UBS) rose by 5% in New York trading.
According to Morningstar analyst Johann Scholtz, Credit Suisse’s domestic bank remains profitable and demonstrates stable revenue. The merger between UBS and Credit Suisse’s Swiss operations is expected to generate significant synergies over time, making it a positive development.