UBS Group AG First Quarter 2024 Filing Summary
Business Context and Reporting Period
This Form 6-K filing covers the First Quarter 2024 (ended March 31, 2024) for UBS Group AG. The period represents the first full quarter of consolidated operations following the acquisition of Credit Suisse Group AG in June 2023. The Group is actively integrating Credit Suisse, with the merger of UBS AG and Credit Suisse AG expected to complete on May 31, 2024. The reporting includes Credit Suisse data for three months in both Q1 2024 and Q4 2023, while Q1 2023 comparatives reflect pre-acquisition UBS data only.
Key Financial Metrics
| Metric (USD) | Q1 2024 | Q4 2023 | Q1 2023 |
|---|---|---|---|
| Total Revenues | 12,739 m | 10,855 m | 8,744 m |
| Operating Profit Before Tax | 2,376 m | (751) m | 1,495 m |
| Net Profit Attributable to Shareholders | 1,755 m | (279) m | 1,029 m |
| Diluted EPS | 0.52 | (0.09) | 0.32 |
| Return on Equity (ROE) | 8.2% | (1.3%) | 7.2% |
| Cost/Income Ratio | 80.5% | 105.7% | 82.5% |
| Common Equity Tier 1 (CET1) Ratio | 14.8% | 14.4% | 13.9% |
| Liquidity Coverage Ratio (LCR) | 220.2% | 215.7% | 161.9% |
| Total Assets | 1,607.1 bn | 1,717.2 bn | 1,053.1 bn |
Material Changes vs. Prior Periods
- Revenue Growth: Total revenues increased 46% year-over-year (YoY) and 17% quarter-over-quarter (QoQ). This growth is primarily driven by the consolidation of Credit Suisse revenues ($3.83 billion) and accretion impacts from purchase price allocation (PPA) adjustments ($815 million).
- Profitability: Operating profit before tax turned positive at $2.38 billion, a significant improvement from the $751 million loss in Q4 2023. Underlying operating profit (excluding integration costs and PPA effects) was $2.62 billion, up 67% YoY.
- Expenses: Operating expenses rose 42% YoY to $10.26 billion, largely due to the consolidation of Credit Suisse expenses ($2.90 billion) and integration-related costs ($992 million). Personnel expenses increased 50% YoY.
- Balance Sheet: Total assets decreased $110 billion QoQ to $1.61 trillion, driven by repayments of funding from the Swiss National Bank (SNB) and currency effects. Risk-weighted assets (RWA) decreased $20.1 billion to $526.4 billion.
Guidance, Outlook, and Risks
- Integration Progress: UBS has achieved $5 billion of exit rate gross cost savings against a $13 billion target by end-2026. The merger of UBS AG and Credit Suisse AG is targeted for May 31, 2024.
- Q2 2024 Outlook: Management expects a low-to-mid single-digit decline in net interest income for Global Wealth Management and a mid-to-high single-digit decrease for Personal & Corporate Banking due to interest rate cuts in Switzerland. Reported revenues are expected to include ~$0.6 billion of PPA accretion, while integration-related expenses are expected to be ~$1.3 billion.
- Tax Rate: The effective tax rate for Q2 is expected to be elevated, with a full-year 2024 rate expected around 40% due to operating losses in certain entities that do not generate tax benefits.
- Regulatory Risks: The Swiss Federal Council has proposed strengthening the "too-big-to-fail" regime, which may increase capital requirements. The Group estimates this could add ~$10 billion to Tier 1 capital requirements, phased in between 2025 and 2030.
- Legal Contingencies: Significant litigation risks remain, including matters related to Credit Suisse (e.g., Archegos, Mozambique, RMBS) and legacy UBS matters (e.g., French tax fraud, LIBOR). Provisions for litigation and regulatory matters totaled $3.92 billion as of March 31, 2024.
Key Facts for Investor Verification
- Merger Completion: Verify the regulatory approval status and completion date of the UBS AG and Credit Suisse AG merger (targeted May 31, 2024).
- Cost Savings Realization: Monitor the trajectory of the $13 billion cost savings target, specifically the realization of the remaining $8 billion by end-2026.
- Capital Requirements: Track the implementation timeline and final cost of the new Swiss "too-big-to-fail" capital add-ons estimated at $10 billion.
- Non-Core and Legacy Reduction: Verify the continued reduction of Risk-Weighted Assets (RWA) in the Non-core and Legacy division, which decreased by $16.1 billion in Q1 2024.
- Share Repurchases: Confirm the commencement of the new $2 billion share repurchase program, which is scheduled to begin after the completion of the UBS AG/Credit Suisse AG merger.