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UBS Group has reported stronger-than-expected client inflows in its wealth management business, driven by the first signs of stabilization at Credit Suisse. The unit saw net new money of $22 billion in the third quarter, with $3 billion of that coming from Credit Suisse’s wealth arm, marking its first positive client flows in a year and a half.
However, UBS posted a net loss of $785 million for the quarter, its first quarterly loss in almost six years, due to the costs of absorbing Credit Suisse, which amounted to $2 billion. The bank expects a further $1 billion of charges in the fourth quarter.
UBS Chief Executive Sergio Ermotti is navigating the complex integration of Credit Suisse and is preparing for a strategic revamp to be announced in February. The bank’s shares have gained about 30% this year as investors support Ermotti’s plan to integrate Credit Suisse’s profitable businesses while winding down the rest.
UBS’s investment banking revenues increased by 36% compared to the same period last year, driven by fees from mergers and acquisitions and leveraged capital markets. However, its revenues for equities decreased by 3% and its fixed-income, rates, and currency trading business saw a 37% decline.
UBS plans to shutter two-thirds of Credit Suisse’s investment bank as part of its integration strategy. The bank has already reduced risk-weighted assets by $6.4 billion by winding down assets inherited from Credit Suisse that it does not want to continue.
UBS has met its goal of reducing expenses by $3 billion this year, but personnel costs have increased, including $500 million in retention payments to key Credit Suisse staff. The bank is also cutting its workforce to further reduce costs.
Overall, UBS has made progress since the merger with Credit Suisse, but still faces significant challenges ahead.