UBS Group AG announced a second-quarter profit of USD 1.14 billion, significantly exceeding expectations, with progress made in cost reduction and integration efforts

With the global economic recovery and increasing market volatility, investors' demand for wealth management continues to grow. UBS Group AG's second-quarter financial report shines, with a net profit of $1.14 billion in the second quarter, far exceeding expectations, and a net profit of $2.9 billion in the first half of the year.

UBS Group AG's global wealth management division saw a 15% increase in revenue, reaching $6.053 billion. UBS attributed this mainly to the merger of Credit Suisse.

After two consecutive quarters of losses, UBS Group AG turned a profit in the first quarter of 2024. However, UBS Group AG warned that its global wealth management, as well as net interest income from personal and corporate banking, will decline.

Following the financial report release, UBS Group AG's stock price rose by over 2%.

UBS Group AG's Second-Quarter Net Profit Doubles Expectations

On Wednesday, August 14, UBS Group AG released its second-quarter financial report for 2024.

Key Financial Data

Operating Income: Total revenue in the second quarter was $11.9 billion, exceeding the estimated $11.49 billion.

Net Profit: Net profit in the second quarter was $1.14 billion, significantly surpassing the estimated $520.8 million, but still lower than analysts' estimated net profit of $176 million in the first quarter.

Earnings Per Share: Earnings per share in the second quarter were $0.34, exceeding the estimated $0.16.

Pretax Profit: Pretax profit in the second quarter was $1.47 billion, exceeding the estimated $986 million.

Common Equity Tier 1 Capital Ratio: The common equity tier 1 capital ratio in the second quarter was 14.9%, exceeding the estimated 14.8%.

Outlook

Against the backdrop of escalating geopolitical tensions and the upcoming U.S. election, the macroeconomic outlook continues to be impacted. UBS Group AG believes that market volatility in the second half of this year may increase compared to the first half.

"Due to ongoing structural changes in global wealth management and the Swiss National Bank's second rate cut, we have seen moderate headwinds in net interest income.

As we execute our integration plans, we expect to incur approximately $1.1 billion in integration-related expenses in the third quarter of 2024, while the pace of total cost savings is expected to slightly decrease. Integration-related expenses should be partially offset by approximately $600 million in purchase accounting effects."

Due to the performance of non-core and legacy businesses not exceeding expectations, UBS Group AG expects an effective tax rate of around 35% in the second half of 2024.

UBS Group AG Makes Steady Progress in Balance Sheet and Cost Reduction, Integration Work Advances

Currently, UBS Group AG is actively reducing costs and continuing to implement integration plans.

In the third quarter, the group reduced risk-weighted assets (RWA) by $15 billion, with over $8 billion coming from core business areas, mainly benefiting from financial resource optimization in Global Wealth Management (GWM) and Personal & Corporate Banking (P&C) UBS has continued to accelerate the reduction of its non-core and legacy (NCL) investment portfolio, with quarterly RWA decreasing by $8 billion, mainly driven by the active exit of most portfolios, resulting in a 42% decrease in total RWA for NCL compared to a year ago.

On May 31, 2023, UBS completed the merger of UBS Group and Credit Suisse Group, followed by the transition to a single U.S. intermediate holding company on June 7, 2024, and the merger of UBS Group and Credit Suisse Group in Switzerland on July 1, 2024.

The completion of these integration efforts has begun to support a more normalized tax rate and will facilitate clients' migration to the UBS platform starting in the fourth quarter of 2024. This migration will initially start from Singapore, Hong Kong, and Luxembourg, marking a key step towards achieving cost, capital, funding, and tax benefits for UBS by the end of 2026