ZURICH (Reuters) – UBS Group (UBSG.S) has secured more cash to cut its involvement in toxic mortgages and prepare to absorb bankrupt rival Credit Suisse (CSGN.S) In the first quarter, profits were cut in half. ).
Chief Executive Sergio Ermotti, who has returned to the saddle to lead the acquisition, also said “challenging” economic conditions have dampened the mood of bank customers, saying the merger could take four years. He warned of the difficulties in embarking on the process.
“I need time,” he said in an online video. “Things are going to get harder.”
UBS shares opened 4.6% lower.
Switzerland’s largest bank’s attempt to clean up problems dating back to the global financial crisis highlights its vulnerability as it grapples with the daunting task of absorbing Credit Suisse. House.
UBS said client activity “could continue to be subdued in the second quarter” as concerns over the banking sector continued globally, but added that higher interest rates would boost lending income. .
Quarterly earnings increased to 52 due to an additional provision of $665 million to cover litigation costs related to U.S. mortgage-backed securities that played a central role in the global financial crisis % decreased.
Net income attributable to shareholders was $1.0 billion, below the consensus average of $1.7 billion in polls conducted by UBS.
But the world’s largest wealth manager also reports strong inflows of around $42 billion.
The company’s flagship asset management division received $28 billion in new funding. That his quarter occurred in his last ten days in March after the announcement to acquire Credit Suisse.
The segment’s pre-tax profit and earnings were reported to be slightly down year-over-year. Rising interest rates boosted deposit income, but at the same time some customers shifted to lower-margin products, he said.
old toxic debt
For five years, ending in 2007, UBS was the issuer and underwriter of US mortgage-backed securities, according to last year’s annual report.
In November 2018, US authorities launched legal action against the Swiss bank, seeking penalties for its involvement in such a large number of transactions. UBS has since lost the lawsuit on this matter.
“We are in ongoing discussions with the U.S. Department of Justice and are pleased that we are making progress toward resolving a legacy issue that goes back 15 years,” Ermotti said.
Investment Bank income fell 19% year-on-year, as expected, and the division’s pre-tax profit declined 49%.
UBS said it expects the Credit Suisse acquisition to close in the second quarter.
Scandal-plagued Credit Suisse has fallen to its knees after a mass of customers left amid turmoil in the global banking sector. Under a deal hastily crafted by Swiss authorities, UBS has agreed to buy it for his CHF3 billion and assume losses of up to CHF5 billion.
Credit Suisse said on Monday that 61 billion francs ($68 billion) of assets had flowed out of banks in the first quarter and continue to flow out, highlighting the challenges facing UBS.
Reported by Noele Illien. Editing by Edwina Gibbs
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