God's Acquisition! Six months later, UBS finally reveals to the world: "How profitable is the acquisition of Credit Suisse"
UBS set a new record for quarterly profits among European and American banks in the second quarter; UBS's market value has risen to second place in Europe, surpassing the American giant Citibank.
After acquiring Credit Suisse for five months, UBS has finally proven to the world how profitable this deal, which was not well-received, can be.
On Thursday, UBS released its first earnings report since the acquisition of Credit Suisse was announced. The results showed that thanks to the "accounting boost" of the $28.9 billion negative goodwill brought by the acquisition of Credit Suisse, UBS achieved a net profit of $28.88 billion in the second quarter, setting a record for the highest quarterly profit among European and American banks.
The most lucrative aspect of this deal is that UBS acquired Credit Suisse for a mere $3.4 billion, which is only 6% of the latter's tangible book value.
It is worth mentioning that the negative goodwill of Credit Suisse is lower than the $34 billion estimated by UBS after its preliminary review of Credit Suisse's books in May, and much lower than the $53 billion as of the end of 2022. This figure clearly measures the value that this deal may create for UBS shareholders in the short term.
UBS confirmed integration costs of $830 million in the second quarter, but this cost was offset by the $1.1 billion generated from actual operations.
At the same time, UBS CEO Sergio Ermotti also confirmed that UBS will retain Credit Suisse's most profitable business, the domestic consumer banking business, as well as the most attractive assets, clients, and employees in the investment banking and wealth management divisions.
As one of the biggest beneficiaries of this deal, UBS's European stock price has soared by 32% year-to-date, reaching its highest level since the 2008 financial crisis, while its US stock price has risen by 40% year-to-date.
Currently, UBS's market value has reached $92 billion, surpassing BNP Paribas to become the second-largest bank in Europe by market capitalization, second only to HSBC. In addition, UBS's market value has also surpassed Citigroup, one of the largest banks in the United States.
UBS stated in its earnings report that funds have started to flow back, and the group's net new assets in wealth management reached $8 billion in July and August.
UBS's Common Equity Tier 1 (CET1) ratio increased from 14.2% in the same period last year to 14.4%, surpassing market expectations. In response, Citigroup analyst Andrew Coombs said that this is good news for shareholder returns.
He said, "This seems to indicate that share buybacks may happen much earlier than originally expected, in addition to the announced dividend plan."
Coombs believes that UBS may resume share buybacks in the first half of next year.
"UBS's performance is simply astonishing," said Cédric Wermuth, co-chair of the Social Democratic Party, the second-largest political group in Switzerland. He referred to this deal as the "deal of the century," and it came at the expense of the Swiss people's interests.