The Swiss bank has retained its position in the US structured products league table despite a fall in equity derivatives activity.

UBS has reported net profit of US$29.2 billion in Q2 2023, including US$28.9 billion of negative goodwill from the Credit Suisse (CS) acquisition to sustain US$238 billion assumed risk-weighted assets (RWA), according to its earnings report that includes the results for the former CS business from 1 June.

Underlying pre-tax profit was US$1.1 billion in Q2 23, of which US$ 2.0 billion from the UBS sub-group. Common equity tier 1 (CET1) capital ratio was 14.4%.

Total revenues increased 7.0% to US$9.5 billion while operating expenses rose 34.8% to US$8.5 billion at UBS, led by CEO Sergio Ermotti (pictured).

In the US market, UBS remains the fifth largest issuer in Q2 23 on back of 954 retail structured notes sold at US$2.2 billion, which formed 9.1% of the market. It follows J.P. Morgan, Goldman Sachs, Citi and Morgan Stanley.

In the prior-year period, the Swiss bank issued 923 products with total traded notional of US$1.8 billion, accounting for 6.2% of the market.

Outside the US, UBS in Q2 23 issued 20,873 products in Switzerland, 6,633 in Germany, 1,066 in Hong Kong SAR, 987 in Taiwan, eight in Sweden, five in France and two in the UK, Finland and Norway, each.

CS acquisition

The bank closed its acquisition of CS on 12 June. The two Swiss entities will operate separately until their planned legal integration for 2024 with the gradual migration of clients onto UBS systems set to be completed in 2025.

CS posted a pre-tax loss of CHF8.9 billion (US$10.1 billion) in Q2 23, or CHF4.3 billion excluding acquisition-related effects. Adjusted pre-tax loss of CHF2.1 billion in the quarter. The bank’s franchise ‘broadly stabilized with net deposit inflows of US$18 billion in Q2 23, momentum continuing into Q3 23’.

CS sub-group pre-tax loss for the month of June was US$1.2 billion, including net credit loss expenses of US$724m and integration-related expenses and acquisition costs of US$374m.

At UBS, global wealth management posted pre-tax profit US$1.1 billion, down four percent year-on-year (YoY), despite a one percent increase of revenues to US$4.7 billion.  

However, the bank noted that Q2 23 saw the highest second-quarter net new money in over a decade at US$16 billion.

‘We have also stabilized CS’ wealth management and Swiss bank, defined the non-core and Legacy perimeter and reduced its RWA by US$9 billion during the second quarter,’ stated the report.

Divisional breakdown

In Q2 23, net inflows into deposits for the combined group were US$23 billion, of which US$18 billion from CS’s wealth management and Swiss bank – the former showed a slower pace in terms of asset outflows compared with the prior quarters and turned positive in June. 

Investment bank pre-tax profit dropped 66% to US$139m as total revenues were down 10%.

Global markets revenues fell 11% to US$1.5 billion ‘primarily driven by lower derivatives & solutions and execution services revenues, partly offset by higher financing revenues’.

Specifically, derivatives & solutions revenues were down 25% to US$631m YoY, or down 27% from the previous quarter due to lower volatility and client activity. Decreases in equity derivatives, rates and foreign exchange (FX) was partly offset by credit.

Global banking revenues were two percent lower, ‘driven by lower advisory revenues, partly offset by increased capital markets revenues’.

By asset class, global markets equities revenues decreased 11% to US$ 1.1 billion, mainly driven by equity derivatives revenues. FX, rates and credit revenues dropped 13% to US$ 387m primarily driven by lower rates and FX revenues, partly offset by credit revenues.

Personal & corporate banking is the only division showing risen profit YoY. Its pre-tax profit rose 54% to CHF612m YoY as revenues increased 24% to CHF1.3 billion.

Pre-tax profit at asset management declined 91% to US$90m YoY while group functions took a loss of US$495m, compared with US$324m in the prior-year quarter.

Click the links to read UBS Group’s Q2 2023 earnings report, presentation and media release.