UBS posts $785mn quarterly loss due to Credit Suisse integration costs

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UBS has unveiled its first quarterly loss in nearly six years as it bears the costs of the takeover of its former rival Credit Suisse.

The $785mn net loss was bigger than the $444mn expected by analysts as UBS shouldered $2.2bn of costs related to the deal. Stripping out takeover-related costs, the lender generated a pre-tax profit of $844mn.

UBS managed to bring in $22bn of net new money into its wealth management business, offering attractive interest rates as it fought to win back clients who had pulled their money in the immediate aftermath of the takeover.

“We are optimistic about our future as we build an even stronger and safer version of the UBS that was called upon to stabilise the financial system in March and one that all of our key stakeholders can be proud of,” said chief executive Sergio Ermotti.

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Ermotti, who returned to the helm within days of UBS agreeing to take over Credit Suisse, is set to unveil a new strategy for the combined business next year.

Credit Suisse, which is currently operating as a subsidiary of UBS and will be legally merged with the wider group next year, signalled it expected a loss of at least $2.2bn in the third quarter through exiting loans and winding down an investment management contract it signed with US alternative investment manager Apollo last year.

Across the group, UBS attracted $33bn of net new deposits, with two-thirds coming from Credit Suisse clients.

UBS wealth management executives are under pressure to retain big clients from both banks after the merger, especially in the Middle East, where several key relationship managers have defected to rivals.

The Swiss bank recently extended a $9bn credit facility to Qatar’s former prime minister, Sheikh Hamad bin Jassim bin Jaber al-Thani, who was a client of UBS and Credit Suisse. He also oversaw the Qatar Investment Authority’s investment in Credit Suisse during the 2008 financial crisis.

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UBS’s investment bank suffered a $230mn loss in the third quarter, largely driven by a fall in global markets revenues and a 50 per cent increase in operating costs, mostly tied to the integration.

In its mid-year results published at the end of August, UBS reported its biggest-ever quarterly profit, almost entirely driven by a $29bn accounting gain linked to the Credit Suisse takeover.

UBS shares have risen 26 per cent to SFr21.85 ($24) since it agreed to rescue Credit Suisse in March, having hit a post-2008 financial crisis high in September.

The shares were given a boost over the summer when UBS said it would not rely on taxpayer money to complete the deal. It terminated a SFr100bn liquidity lifeline offered by the Swiss National Bank at the height of the turmoil that swept the banking sector in the spring and culminated in the Credit Suisse takeover.

Since completing the acquisition, UBS has tried to settle a spate of long-running legal disputes, including one with the government of Mozambique last month over an alleged £2bn “tuna bond” fraud that wrecked the country’s finances.

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UBS on Monday said it had reached an agreement with Lebanese shipbuilder Privinvest to settle a related case in the London High Court.

The takeover itself has sparked at least $9bn of legal claims from investors who lost money on the deal.