UBS Group AG has reported a significant decline in profits for the first quarter of 2023, citing an increase in provisions for a legacy litigation matter as the cause. The Swiss bank has been going through a tumultuous period, having been forced to take over its former rival, Credit Suisse. The net profit attributable to shareholders was $1.03 billion, which is significantly lower than the $1.71 billion estimated by 15 analysts in a UBS-conducted poll.
UBS has disclosed that it increased provisions related to the litigation concerning US residential mortgage-backed securities by $665 million. The bank is currently in advanced discussions with the US Department of Justice to resolve the legacy matter, which dates back 15 years.
Sergio Ermotti, Chief Executive of UBS, who has recently rejoined the bank to steer the takeover, said, "I am pleased that we are making progress toward resolving the legacy matter," in a statement. UBS, the world's largest wealth manager, reported inflows of $42 billion in the first quarter, with its flagship wealth management division receiving $28 billion in net new money.
The recent scandal-plagued Credit Suisse had been brought to its knees, as clients left in droves amid global banking sector turmoil. Swiss authorities hastily engineered a deal where UBS agreed to take over Credit Suisse for 3 billion Swiss francs and to assume up to 5 billion francs in losses.
Credit Suisse disclosed on Monday that 61 billion francs ($68 billion) in assets had left the bank in the first quarter, with outflows continuing. This underscores the challenge faced by UBS in taking over the beleaguered Credit Suisse.
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