By Dave Graham
ZURICH (Reuters) – UBS Group on Wednesday posted third-quarter revenue effectively above forecasts, pushed by greater income and price reductions, and accomplished a primary wave of consumer migrations from Credit score Suisse since buying its former rival final 12 months.
Internet revenue attributable to shareholders at Switzerland’s largest financial institution was $1.4 billion, practically double the $740 million estimated by analysts in a company-provided ballot. Whole income got here in at $12.3 billion, beating the $11.5 billion consensus.
However the financial institution’s shares have been greater than 3.5% decrease by 1330 GMT, giving up early features of practically 4%, after taking a success because of uncertainty about regulatory modifications, the broader outlook and the way a lot spare capital the financial institution would have going into subsequent 12 months.
UBS CEO Sergio Ermotti hailed the financial institution’s income progress and highlighted what he known as sturdy consumer momentum, notably within the Americas and within the Asia Pacific area.
“However there isn’t a room for complacency. We’re nearly midway to restoring pre-acquisition ranges of earnings and returns on capital,” he informed an analyst name.
Markets are ready to see how robust Swiss authorities will probably be with new rules for the financial institution, notably on capital.
The federal government desires UBS and different systemically essential banks to carry extra capital to forestall the chance of one other Credit score Suisse-style collapse.
Ermotti stated in August he anticipated the regulatory outlook to change into clearer across the flip of the 12 months. However on Wednesday he stated it was not possible he would have way more readability by February.
Andreas Venditti, an analyst at Vontobel, stated Ermotti’s feedback had in all probability helped push UBS shares into the purple.
“The market doesn’t like that the regulatory uncertainty may last more than some might need hoped,” he stated.
COST REDUCTIONS
UBS’s funding financial institution delivered an working revenue twice as excessive because the consensus forecast offered by the financial institution, whereas losses on the non-core and legacy unit, which handles undesirable Credit score Suisse property, have been under expectations.
UBS stated it was progressing effectively with value discount plans and now expects to realize a determine of round $7.5 billion this 12 months. Beforehand it had forecast round $7 billion.
UBS has begun shifting shoppers from Credit score Suisse onto its personal platforms, and the financial institution accomplished the primary section of consumer account migrations in Luxembourg and Hong Kong throughout October.
Singapore and Japan have been anticipated by year-end and Switzerland will observe subsequent 12 months, the financial institution stated. Ermotti stated he expects the method to final about 18 months.
On the fourth quarter, UBS stated “ongoing geopolitical conflicts and the upcoming U.S. elections are creating uncertainties which can be more likely to have an effect on investor behaviour.”
In Could, UBS formally accomplished the merger with Credit score Suisse. Ermotti stated final month that UBS’s integration of its former competitor was working forward of schedule.
On account of that progress, UBS stated it accelerated amortization of so-called transitional buy worth allocation changes for widespread fairness tier 1 capital. Consequently, UBS’s widespread fairness tier 1 capital ratio – a measure of monetary energy – now stood at 14.3%, down from 14.9% within the earlier quarter.
Citi analyst Andrew Coombs stated that change and new Basel capital guidelines coming into power in January meant that UBS now had “little or no extra capital in the present day relative to its ~14% goal, so any (share) buyback subsequent 12 months will now have to come back out of natural capital technology, which limits the scope.”
On high of that, Coombs stated, was the continued uncertainty surrounding the foundations on capital necessities.
