UBS has reported that weak economic growth in Europe, particularly in its lending operations, has had a significant impact on the bank.
The Chief Financial Officer, Todd Tuckner, stated that UBS expects a credit loss expense of approximately 150 million Swiss francs for 2024, primarily in its personal and corporate banking sectors. This forecast reflects the challenges posed by sluggish economies in the eurozone, which directly affect the Swiss corporates that UBS serves.
Tuckner emphasized the interconnectedness of the Swiss economy with its European neighbors, noting that Swiss companies engaged in export-import activities are feeling the strain of slower growth in key markets like Germany. When neighboring economies falter, credit loss expenses tend to rise.
The integration of Credit Suisse, which UBS acquired following its collapse last year, adds complexity to UBS's financial landscape. Tuckner mentioned that the non-core legacy unit responsible for managing Credit Suisse's assets is expected to report a pre-tax loss of US$700 million in the upcoming quarter.
As UBS continues to integrate Credit Suisse, Tuckner provided insights into the migration of clients, which will occur in stages. The transition for clients in Singapore is scheduled for this weekend, with similar migrations planned for Japan and Italy by the end of the year. This integration process is crucial for UBS as it aims to streamline operations and enhance its market position after acquiring its long-time rival.
Despite the challenges posed by sluggish growth in Europe, Tuckner expressed optimism about UBS's performance in the Asia-Pacific region. He noted that the bank has experienced a positive environment in this area, which has continued into the early part of the fourth quarter. Furthermore, Tuckner highlighted the strong performance of UBS's investment banking division, indicating that the bank is well-positioned to navigate the current economic landscape.
UBS is currently facing uncertainty regarding potential changes to capital requirements for banks in Switzerland. Tuckner mentioned that discussions on stricter regulations to prevent future bank collapses are ongoing, and UBS may not receive clarity on these matters until early February. The Swiss government has committed to considering the findings of a parliamentary report on the Credit Suisse collapse, which is expected to be published in the coming weeks. However, Tuckner speculated that the report's release might be delayed until early 2025.
This regulatory environment adds complexity for UBS as it adapts to evolving requirements while managing the integration of Credit Suisse. The bank's leadership is aware of the implications that stricter capital rules could have on its operations and overall financial health. UBS's focus remains on maintaining stability and ensuring robust performance in its core business areas.