UBS Made a Fast Start in Butchering Credit Suisse

Sergio Ermotti promised ruthlessness in reshaping Credit Suisse Group AG, and the chief executive officer of UBS Group AG has been true to his word.

His team cut costs and offloaded assets from its one-time rival faster than planned, as revealed in UBS’s in third-quarter results on Tuesday. Investors took this as a sign that UBS could restart stock buybacks sooner. The shares rose as much as 5% in early trade.

UBS acquired the failing Credit Suisse this summer in a shotgun marriage arranged by Swiss regulators. The earnings report showed signs of a surer footing for the combined wealth and banking businesses, but there was also evidence of decimation in Credit Suisse’s investment bank.

The big positive was that UBS has managed to sweet talk Credit Suisse customers into returning billions of deposits, especially in wealth management. In wealth and the domestic Swiss bank, it took in $33 billion, two-thirds of which was from Credit Suisse clients. That followed inflows of $23 billion in the second quarter, most of which was also from Credit Suisse clients. While healthy, that’s a long way from replacing the $171 billion in outflows that Credit Suisse suffered in the previous two quarters.

UBS is Winning Back Credit Suisse Depositors

To some degree, UBS is paying up to attract money back, although the best rates are likely being offered to clients with lucrative trading, investing and borrowing accounts. Still, deposit costs are higher as many customers are moving cash to higher-yielding savings accounts, which has squeezed net interest income. The wealth unit’s NII was down 18% versus what both banks earned separately in the third quarter last year. Offsetting this, however, NII was up 24% in the domestic Swiss bank, which relies more on cheaper corporate deposits for funding.

UBS's Deposit Costs Are Rising in Wealth Management