San Francisco Frontiers - UBS to spell out growth plan after Credit Suisse takeover

Clues as to how Switzerland's largest bank plans to reward its shareholders after the dramatic takeover will also be of interest, observers say.

The bank is due to present its fourth quarter earnings and results for all of 2023 -- an exceptional year during which it was strongarmed by Swiss authorities into the $3.25-billion takeover of Credit Suisse, which had been teetering on the verge of bankruptcy.

"Investors' main focus will be on the three-year strategic plan for the combined entity, updated financial targets, and guidance on returning capital to shareholders," Vontobel analyst Andreas Venditti said in a research note.

During a conference last September, UBS chief Sergio Ermotti had promised to present a fresh three-year plan along with the annual results, since the Credit Suisse takeover had forced a rethink of the bank's strategy.

- 'Critical mass' -

Ermotti highlighted among other things the potential for expanding the bank's operations through more mergers and acquisitions in the United States -- the world's biggest market for business transactions.

"In the US, I think it's very important to look at the integration of the investment bank and how those capabilities will allow us to give our client advisers, financial advisers in the US even more opportunities to help clients to monetise or through M&A transactions for their own businesses," he said.

"We now have finally critical mass in the US in terms of bankers. And also we look at ways to diversify revenue streams in our wealth management business in the US."

The results themselves were meanwhile expected to be less cheery.

For the fourth quarter alone, analysts polled by the Swiss financial news agency AWP expected UBS to take a $498-million net loss.

"Reported results will be impacted by significant restructuring charges," Venditti said, pointing to an analyst consensus that the charges taken during the three-month period would tick in at $1.3 billion.

Analysts with ZKB meanwhile said that most focus would likely be on the pre-tax result, which is often seen as a better indicator of how a business is doing.

- In the 'profit zone'? -

Investors, they predicted, will be scouring the fourth quarter results for signs of "further progress in the integration of Credit Suisse and whether the adjusted result has already reached the profit zone, as promised by management".

UBS agreed to the Credit Suisse takeover last March, and at the end of August it announced its decision to fully absorb its former rival, instead of listing it separately as some were calling for.

That decision will entail a vast restructuring, with integration of Credit Suisse's Swiss business alone set to slash 1,000 jobs in the wealthy Alpine country by the end of this year, and another 2,000 in the years to come, Ermotti said at the time.

The bank has said it aims to fully integrate Credit Suisse by 2026, raking in $10 billion in savings in the process.

Most work will need to be put into integrating Credit Suisse's investment bank, which was at the heart of multiple scandals and crises that preceded its demise.

While investors initially appeared sceptical following the takeover deal, announcements from UBS, including its decision not to accept state support, quickly calmed the markets, and the bank has since seen its share price swell more than 48 percent.

H.Reyes--SFF