The Zurich-based bank said net income in the first quarter was $1.8 billion, compared with analysts estimates of $598 million. The key wealth management unit saw net new assets come in better than expected at $27 billion, while the combined investment bank reported an upbeat performance in the US that helped return the first profit since the takeover.

UBS surged after the release, up 8.1% as of 09:40 a.m. in Zurich.

With the bank targeting the completion of the legal merger with Credit Suisse by May 31, a robust set of results will buttress UBS Chief Executive Officer Sergio Ermotti as he grapples with a tightening regulatory outlook. The Swiss government last month proposed an increase in the capital levels that UBS is required to maintain that could run to around $20 billion. 

Given that the implementation of the new rules is likely to come in 2026 at the earliest, Ermotti signaled that UBS intends to return about $2 billion to investors over the next two years. 

“We also see good momentum with clients, with inflows across our businesses, and our capital is strong, so allowing us to continue to pursue our capital return plans,” Ermotti said in an interview with Bloomberg Television’s Francine Lacqua on Tuesday. 

A big boost to the performance came from a continued revaluation of the assets and liabilities UBS bought as part of the Credit Suisse takeover last year. The bank also booked a $272 million gain in the unit dedicated to winding down Credit Suisse businesses, related to the sale of assets to Apollo Global Management Inc. 

Excluding such effects, “the key operating divisions only mildly outperformed,” analysts at KBW including Thomas Hallett wrote in a note. “This being said, we do not envisage any major declines to group earnings which have been a key theme in the previous quarters.”

In its outlook, UBS signaled that the turning central-bank rate environment is beginning to impact earnings from lending. Partly as a result, the bank expects net interest income declines in wealth management and personal and corporate banking.

On the integration, UBS said it had realized about $1 billion in cost savings in the first quarter and was targeting another $1.5 billion by the end of 2024. 

Revenue in the wealth management unit rose to a reported $6.1 billion in the quarter, from $5.6 billion at the end of December. The bank said that the Americas, Switzerland and Asia-Pacific in particular drove the result. 

UBS’s investment bank posted before-tax profit of about $555 million, compared with analyst estimates for $398 million. Revenue at the investment bank’s unit that houses advisory as well as debt and equity capital markets services rose 52% from a year earlier. In asset management, before-tax profit came in at $111 million, below estimates. 

Capital Plans

The Swiss Federal Council wants systemically-important banks to hold significantly more capital against their foreign units to protect against future risks. UBS faces a capital hit that could reach about $20 billion if the reforms come into effect. The proposals are designed to make the country’s banking sector safer and address a weakness that helped accelerate Credit Suisse’s demise last year.

UBS executives have spoken out against the need for more capital. UBS Chairman Colm Kelleher said last month that the proposal is the “wrong remedy” to the failure of Credit Suisse, adding the lender is “seriously concerned” about some of the discussions around additional buffers.

The bank said its CET1 ratio, a measure of capital strength, was 14.8% at the end of the quarter. Ermotti said that it’s too early to discuss in detail the impact of the new rules.