UBS reports 3Q24 net profit of USD 1.4bn with 6.2trn in invested assets; delivering for clients, executing on integration at pace and investing for growth (Ad hoc announcement pursuant to Article 53 of the SIX Exchange Regulation Listing Rules)

Key highlights (Graphic: UBS Group AG)

UBS (NYSE:UBS) (SWX:UBSN):

Key highlights

• 3Q24 PBT of USD 1.9bn and underlying¹ PBT of USD 2.4bn demonstrating the strength of our client franchises, diversified business model and global scale; net profit of USD 1.4bn, RoCET1 of 7.6% and underlying RoCET1 of 9.4%
• Continued client momentum with USD 25bn of net new assets in Global Wealth Management, on track to deliver on our ambition of USD ~100bn in NNA for 2024; Group invested assets of USD 6.2trn, up 15% YoY; granted or renewed CHF ~35bn in loans in Switzerland in the quarter
• Strong transactional activity across Global Wealth Management and the Investment Bank, underlying GWM transaction-based income up 19% YoY, Global Markets revenues up 31% YoY
• Non-core and Legacy RWA reductions remain ahead of plan; with USD 5bn in 3Q24 and USD 41bn since 2Q23
• Delivering on cost-reduction ambitions with additional USD 0.8bn in gross cost savings realized in 3Q24 and USD ~7.5bn expected for full-year 2024
• Successful completion of first wave of client account migrations withtransfers in Luxembourg and Hong Kong in October; Singapore and Japan expected by year-end and Switzerland in 2025, positioning us well to enhance the client experience and to unlock next phase of significant cost saves toward the end of 2025 and in 2026
• Strong capital position allowed us to voluntarily accelerate the phase-out of the remaining transitional capital adjustments agreed with our regulator, bringing the CET1 capital ratio in line with our guidance; we remain committed to our dividend and buyback ambitions for 2025 and 2026
• Positioning for long-term growth with investments in our people, products and capabilities, including technology withroll out of 50,000Microsoft 365 Copilot licenses to our employees by March 2025, the largest deployment within the global financial services industry to date

“Our performance in the third quarter demonstrates the power of our unique client franchises, global scale and diversified business model. Against a market backdrop that, while constructive, still exhibited periods of high volatility and dislocation, our businesses delivered impressive revenue growth as we maintained strong client momentum, particularly in the Americas and APAC. We continue to significantly mitigate execution risk as we progress on the integration of Credit Suisse while remaining disciplined in driving our cost and efficiency targets. At the same time, we are investing in our people, products and capabilities, including technology, to enhance client experience, improve productivity and achieve sustainably profitable growth.” Sergio P. Ermotti, Group CEO

Selected financials for 3Q24

Group summary

Strong financial performance

In 3Q24, we reported PBT of USD 1,929m and underlying PBT of USD 2,386m. Net profit attributable to shareholders was USD 1,425m and return on CET1 capital was 7.6%, or 9.4% on an underlying basis.

Reported revenues were USD 12,334m, up 5% YoY. On an underlying basis, revenues increased by 9% YoY to USD 11,672m, as strong transactional activity and recurring fee income driven by higher average invested assets more than offset the expected net interest income headwinds. Reported Group operating expenses decreased by 12% YoY to USD 10,283m. On an underlying basis, operating expenses decreased by 4% YoY to USD 9,165m as we continued to execute on our integration and efficiency plans.

Continued franchise strength and client momentum

During the third quarter, we remained close to our clients, guiding them through a market environment that while constructive, also showed signs of dislocation and volatility. Clients continue to value the investment opportunities we provide across our advice platform, as demonstrated by USD 25bn in net new assets in GWM. We remain on track to deliver on our ambition of USD ~100bn in NNA in 2024. We also generated USD 15bn of net new fee generating assets in the quarter, reflecting strong discretionary mandate sales in all regions with disciplined pricing. Group invested assets increased by 15% YoY to USD 6.2trn.

As a leading provider of credit to Swiss companies and the economy, we are also delivering on our commitments to our home market. In the quarter, we granted or renewed CHF ~35bn of loans in Switzerland.

Transactional activity was strong during the quarter across both private and institutional clients. In GWM, underlying transaction-based income increased by 19% YoY with strong momentum across all regions, led by the Americas and APAC. In the IB, Global Markets delivered revenues of USD 1.9bn, up 31% YoY, mainly driven by higher client activity and the strength of our expanded franchise, with gains across all regions, particularly in the Americas.

In Global Banking, underlying revenues increased 21% YoY with strong M&A performance in Asia and the US.

Ahead of plan on financial and operational integration priorities

We continue to execute on our integration plans, de-risking our balance sheet, and delivering on our cost reduction ambitions.

In 3Q24, we further reduced NCL RWA by USD 5bn, primarily through active unwinds across the loan and securitized products portfolios, bringing the total RWA reduction in NCL to USD 41bn since 2Q23. Similarly, NCL LRD decreased by 69% since 2Q23, including USD 11bn in the third quarter. Since last June, we have closed 52% of active books, around a year ahead of our original schedule.

In the quarter, we maintained our cost optimization momentum across the Group, delivering an additional USD 0.8bn in gross cost saves. By the end of 2024 we expect to achieve USD ~7.5bn of gross cost savings, or ~58% of our total cumulative gross cost save ambition.

Since June, we have also significantly advanced our work on migrating wealth management client accounts and data to UBS platforms. In October, we successfully achieved another milestone, moving all client accounts serviced out of Luxembourg and Hong Kong, a key booking hub in APAC. We are on track to complete the ongoing account transitions in Singapore and Japan by the end of this year, and will be in position to commence the next phase of transfers in Switzerland in the second quarter of 2025.

With this we are well positioned to enhance the client experience and to unlock further cost reductions toward the end of 2025 and into 2026, as we deliver on our ambition of USD ~13bn in gross cost saves by the end of 2026.

Maintaining strong capital position; expecting to operate at ~14% CET1 capital ratio; remain committed to capital returns ambitions

In the third quarter of 2024, reflecting our strong capital position, completion of legal entity mergers, overall progress on the integration and the winding down of NCL, we voluntarily accelerated the amortization of the remaining transitional purchase price allocation (PPA) adjustments for common equity tier 1 (CET1) capital purposes. This resulted in a USD 3.4bn decrease in CET1 capital and a CET1 capital ratio of 14.3%. Excluding this adjustment, the CET1 capital ratio would have been 14.9%.

In connection with the acquisition of the Credit Suisse Group in 2023, the Swiss Financial Market Supervisory Authority (FINMA) had approved neutralizing a CET1 capital effect of USD 5.0bn (net of tax) of interest-rate and own-credit-driven fair value adjustments for UBS Group AG that are expected to fully reverse into income and be accretive to CET1 capital over time. The transitional treatment was subject to linear amortization at the rate of USD 0.3bn per quarter through 30 June 2027. This quarterly amortization was eliminated upon fully amortizing the transitional treatment in the third quarter of 2024.

As these transitional adjustments only applied to UBS Group AG, the regulatory capital position of UBS AG was not impacted by the decision to fully amortize them. On a standalone basis as of 30 September 2024, UBS AG’s fully applied CET1 capital ratio is expected to be around 13.3%.

We expect that the adoption of the final Basel III standards in January 2025 will lead to a low single-digit percentage increase in the UBS Group’s RWA, reducing the CET1 capital ratio by around 30 basis points. This estimate is based on our current understanding of the relevant standards as we are in an active dialogue with FINMA regarding various aspects of the final rules. We continue to expect to operate with a CET1 capital ratio of around 14% after the implementation of the final Basel III standards.

We expect to complete our planned USD 1bn of share repurchases in the fourth quarter of 2024. Our ambition to continue share repurchases in 2025 and for our capital returns in 2026 to exceed pre-acquisition levels is unchanged. Our ambitions beyond 2025 are subject to our assessment of any proposed requirements from Switzerland’s ongoing review of its capital regime.

Investing for long-term growth in our people, products and capabilities

In addition to meeting the current needs of our clients, executing the integration, and delivering on short term plans, we remain focused on positioning UBS for long-term growth. We continue to self-fund our investments in our people, products and capabilities to further develop our client offerings across all of our businesses, including our growth regions, Americas and APAC.

This includes building on our long-standing AI expertise and industry-leading cloud position to accelerate development and adoption of GenAI solutions that benefit clients and employees.

With the rollout of 50,000 Copilot licenses between now and the end of March 2025, UBS is currently implementing the largest Microsoft 365 Copilot deployment within the global financial services industry to date. Another example is Red, a proprietary new AI assistant that will provide 20,000 employees in Switzerland, Hong Kong, and Singapore with easy access to UBS product information and investment research. In the Investment Bank, we are piloting a proprietary AI algorithm that researches and compiles potential merger and acquisition buy-side targets.

In these, and the many other AI deployments that are underway across the entire firm, we are focused on responsible AI. For example, all employees Group-wide are currently completing a ‘Responsible use of Generative AI’ training.

Outlook

In the third quarter of 2024 we saw strong client activity against a market backdrop that, while constructive, still exhibited periods of high volatility and dislocation.

Entering the fourth quarter, we see a continuation of these market conditions sustained by the prospects of a soft landing in the US economy. However, the macroeconomic outlook in the rest of the world remains clouded. In addition to seasonality, the ongoing geopolitical conflicts and the upcoming US elections are creating uncertainties that are likely to affect investor behavior.

In the fourth quarter, we anticipate a mid-single digit decline in net interest income in Global Wealth Management and a low single-digit decline in Personal & Corporate Banking. Non-core and Legacy is expected to generate a quarterly pre-tax loss in line with our earlier guidance.

The Group’s non-personnel costs are expected to show a seasonal sequential uptick. The Group’s quarterly tax rate is expected to be around 35%. Integration-related expenses are expected to be around USD 1.2bn and accretion of PPA effects to contribute around USD 0.5bn to the Group’s total revenues.

As we stay close to clients, helping them navigate this environment, and execute on our priorities, we will continue to invest to drive sustainable long-term value for our stakeholders while maintaining a balance sheet for all seasons.

Third quarter 2024 performance overview – Group

Group PBT USD 1,929m, underlying PBT USD 2,386m

PBT of USD 1,929m included PPA effects and other integration items of USD 662m and integration-related expenses and PPA effects of USD 1,119m. Underlying PBT was USD 2,386m, including net credit loss expenses of USD 121m. The cost/income ratio was 83.4%, and 78.5% on an underlying basis. Net profit attributable to shareholders was USD 1,425m, with diluted earnings per share of USD 0.43. Return on CET1 capital was 7.6%, and 9.4% on an underlying basis.

Global Wealth Management (GWM) PBT USD 1,085m, underlying PBT USD 1,280m

Total revenues increased by 4% to USD 6,199m, largely driven by higher recurring net fee and transaction-based income, partly offset by lower net interest income. Excluding PPA effects and other integration items of USD 224m, underlying total revenues were USD 5,975m, an increase of 7%. Net credit loss expenses were USD 2m, compared with net expenses of USD 10m in the third quarter of 2023. Operating expenses increased by 2% to USD 5,112m, largely due to an increase in personnel expenses, which resulted from higher financial advisor compensation reflecting an increase in compensable revenues. Excluding integration-related expenses and PPA effects of USD 419m, underlying operating expenses were USD 4,693m, an increase of 3%. The cost/income ratio was 82.5%, and 78.5% on an underlying basis. Invested assets increased by USD 221bn sequentially to USD 4,259bn. Net new assets were USD 24.7bn.

Personal & Corporate Banking (P&C) PBT CHF 728m, underlying PBT CHF 659m

Total revenues decreased by 8% to CHF 2,056m, largely reflecting lower net interest income. Excluding PPA effects and other integration items of CHF 239m, underlying total revenues were CHF 1,818m. Net credit loss expenses were CHF 71m, compared with net expenses of CHF 147m in the third quarter of 2023. Operating expenses increased by 1% to CHF 1,258m. Excluding integration-related expenses and PPA effects of CHF 170m, underlying operating expenses were CHF 1,088m. The cost/income ratio was 61.2%, and 59.9% on an underlying basis.

Asset Management (AM) PBT USD 151m, underlying PBT USD 237m

Total revenues increased by 13% to USD 873m, mainly reflecting a USD 72m net gain from both the closing of the remaining portion of the sale of our Brazilian real estate fund management business and the sale of our shareholding in Credit Suisse Insurance Linked Strategies Ltd. Operating expenses decreased by 2% to USD 722m. Excluding integration-related expenses of USD 86m, underlying operating expenses were USD 636m, an increase of 4% driven by higher personnel expenses, reflecting higher revenues, and higher expenses for litigation, regulatory and similar matters. The cost/income ratio was 82.7%, and 72.8% on an underlying basis. Invested assets increased by USD 96bn sequentially to USD 1,797bn. Net new money was USD 2.0bn, and USD (4.8bn) excluding money market flows and associates.

Investment Bank (IB) PBT USD 405m, underlying PBT USD 377m

Total revenues increased by 22% to USD 2,645m, due to higher Global Markets and Global Banking revenues. Excluding PPA effects of USD 185m, underlying total revenues were USD 2,461m, an increase of 29%. Net credit loss expenses were USD 9m, compared with net expenses of USD 4m in the third quarter of 2023. Operating expenses decreased by 7% to USD 2,231m, largely due to a decrease in integration-related expenses. Excluding integration-related expenses of USD 156m, underlying operating expenses were USD 2,076m, an increase of 2%. The cost/income ratio was 84.4% on both a reported and an underlying basis. Return on attributed equity was 9.5%, and 8.8% on an underlying basis.

Non-core and Legacy (NCL) PBT USD (603m), underlying PBT USD (333m)

Total revenues decreased by 29% to USD 262m, mainly due to lower net interest income and trading revenues as a result of portfolio reductions, and included a USD 67m gain from the sale of our investment in an associate. Net credit loss expenses were USD 28m, compared with net expenses of USD 59m in the third quarter of 2023. Operating expenses decreased by 60% to USD 837m, mainly due to decreases in integration-related expenses, professional fees, outsourcing expenses and personnel expenses, and included releases of USD 84m of IFRS 3 acquisition-related contingent liabilities following settlements reached in the third quarter of 2024. Excluding integration-related expenses of USD 270m, underlying operating expenses were USD 567m, a decrease of 51%.

Group Items PBT USD 45m, underlying PBT USD 60m

UBS’s sustainability highlights

We are guided by our ambition to be a global leader in sustainability.We remain committed to supporting our clients in the transition to a low-carbon world, leading by example in our own operations, and sharing our lessons learned along the way.

In September, MSCI reaffirmed our AA ESG rating and we increased our S&P Global Corporate Sustainability Assessment score. These are our first fully consolidated ESG ratings post the acquisition of Credit Suisse.

To build on our strong foundation, we are evolving our sustainability strategy, based on three pillars:

− Protect: manage our business aligned to our sustainable, long-term strategy;

− Grow: continue to expand our sustainability and impact offering for our clients to meet their evolving needs; and

− Attract: be the bank of choice for clients and employees.

We will communicate further details on our approach in our 2024 Sustainability Report, which will be published on 17 March 2025.