UBS delivers record Q2 after $29bn accounting gain from Credit Suisse

(Sharecast News) - Swiss banking giant UBS has delivered a record bottom line in its second quarter after booking a $29bn accounting gain from its takeover of Credit Suisse, but underlying profits still failed to meeting analysts' forecasts. The company reported a pre-tax profit of $29.2bn, the largest ever quarterly profit for a bank, compared with $2.1bn a year earlier. These were the first results published since it officially took over Credit Suisse in June.

However, that mainly reflected $28.9bn in negative goodwill from the Credit Suisse acquisition - which recognises the amount extra it paid over the fair value of the assets.

Excluding negative goodwill and any integration-related expenses and acquisition costs, pre-tax profits came in at just $1.1bn, which according to analysts at Citi, is some 28% below consensus forecasts. UBS said it made $2bn in profit from its own operations, while Credit Suisse reported pre-tax losses of CFH2.1bn.

"Two and a half months since closing the Credit Suisse acquisition, we are wasting no time in delivering value for all our stakeholders from one of the biggest and most complex bank mergers in history," said chief executive Sergio P. Ermotti.

Meanwhile, the bank's CET1 capital ratio improved to 14.4% from 14.2% the year before, while the underlying cost-to-income ratio came in at 80.3%.

UBS also announced that Credit Suisse's main banking division will now be fully absorbed, which it said was the "best outcome for UBS, our stakeholders and the Swiss economy". UBS and Credit Suisse Swiss Bank will operate separately until their planned legal merger in 2024.

As for the wider integration of Credit Suisse, UBS reckons that will complete by the end of 2026, by which time it will have achieved cost savings of over $10bn.

For the coming third quarter, underlying pre-tax profits are expected to be breakeven, moving into positive territory for the second half as a whole.