UBS Net Profit Surges on Provision Releases, Client Momentum — Update

By Adria Calatayud

UBS Group reported a jump in third-quarter net profit, boosted by fees from wealthy clients and corporate dealmaking and the release of litigation provisions.

The Swiss banking giant said Wednesday that net profit for the third quarter was $2.48 billion, up from $1.425 billion in the year-earlier period. The figure beat analysts' expectations of $1.29 billion, according to consensus estimates compiled by the bank.

UBS said its results benefited from strong client momentum, as it attracted new money from wealthy customers, as well as from trading and deal activity in a favorable market environment. Its bottom line also got a boost from releases of litigation reserves of $668 million the bank had previously booked after recent settlements for both Credit Suisse--which it bought in 2023 in a state-orchestrated deal--and UBS.

Last quarter, UBS entered into a $300 million settlement related to outstanding obligations Credit Suisse had committed to in a deal with the U.S. Justice Department over bonds backed by mortgages sold before the 2008 financial crisis. It also agreed to pay nearly $1 billion in France to resolve a longrunning case over its role in helping wealthy clients evade taxes.

But more legal battles loom on the horizon. UBS said it intends to appeal a Swiss court judgment that ruled there was no legal basis to wipe out more than $17 billion in Credit Suisse bonds, a sweetener that authorities added to UBS's rescue deal. The bank said the write-off was an integral part of the acquisition and that, in UBS's view, it complied with both contractual terms and Swiss law.

UBS is also facing the prospect of steeper capital requirements in its home country while it continues a yearslong effort to integrate Credit Suisse. The bank has voiced opposition to Switzerland's proposed new rules and is now trying to convince lawmakers that it doesn't need bigger capital buffers to stay safe.

The bank made further progress on the Credit Suisse integration, taking its cumulative cost savings of $10 billion that leave it one quarter ahead of schedule, UBS said.

Moreover, the group's global wealth management arm--its biggest profit engine--attracted $38 billion in net new assets, accelerating from $23 billion in the previous quarter.

This helped UBS report an underlying pretax profit of $3.59 billion that was ahead of both consensus expectations of $2.44 billion and the year-earlier result of $2.39 billion.

Revenue grew to $12.76 billion from $12.33 billion, mainly driven by increases in its investment bank and global wealth management businesses. This exceeded expectations of $11.99 billion, according to the same consensus.

Looking forward, UBS said it expects quarter-end transaction activity in the investment bank to normalize, after the year-earlier period was busier than usual due to the U.S. election. Investors remain engaged, but are increasingly seeking to hedge downside risk amid elevated valuations across most asset classes, the bank said.

Write to Adria Calatayud at adria.calatayud@wsj.com