Switzerland’s largest bank seems intent on cutting out the emotion related to the Credit Suisse integration and getting back to business, clients, and banking. Is upping the jargon quotient the right answer? 

It seems UBS trying its very best to turn a new page. Fresh on the heels of successfully managing the first phase of its government-prompted rescue of Credit Suisse, as finews.com reported earlier, it now seems intent on steering things down a different path.

In fact, the full quarterly report seemed aimed at taking the wind out of the sails of what has become a very fraught and emotional discussion in Switzerland. The approach - possibly technical, even super-technical.

Very Sequential

For example, a key sentence in their fourth quarter outlook went as follows: «These factors are expected to result in substantial sequential improvement in reported net profit in the first quarter, including around USD 1bn of integration-related expenses and around USD 0.7bn of pull to par and other purchase price allocation (PPA) accretion effects.»

The short of it is that they expect net profit to improve in the first quarter when compared to the fourth quarter. 

Jumbled Figures

Our take - we can get around the lack of any mention of a year-earlier comparable period given the way numbers have been turned upside down by integrating what was once Switzerland’s second-largest bank.

But talking in Wall Street quarterly conference call-speak by throwing in «sequential» is going to be lost on some close readers of the report, and maybe retail investors.

Pull to Par

Moreover, the use of pull to par might best be left with the bond markets as a descriptive, even colorful, way to describe the face value of a bond as it nears maturity – or not. 

The PPA accretion effect, well - that is complicated. Still, it is described in detail on page 39 of the full quarterly report, and mentioning it briefly in the outlook saying that it related to negative goodwill might have been enough since investors have been comfortable with that term from the get-go, as finews.com and other mainstream media have used the term at some length.

Residual Effects

We are getting off track. The truth is that sequential had already reared its head again in the sentence before the one above, although it first came up as an adverb instead of an adjective.

«We expect NII for Personal & Corporate Banking and Global Wealth Management combined, and in US dollar terms, to be roughly flat sequentially in the first quarter, with higher rates broadly offsetting the residual effects of deposit mix shifts and the initial impact of financial resource optimization,» UBS indicated.

Largely Similar

Here, again, they are saying that the interest income they earn in the first quarter will be largely the same as it was in the last three months of the year.

After that, it is relatively easy to get lost in deposit mix shifts and financial resource optimization. The interpretation of deposit mix shifts is likely what had been reported farther down on page 12 in that interest rate margins had been improving because of higher rates although the benefit from that was cut by shifts to lower-margin types of products, at least in personal and corporate banking and wealth management.

Returning to Normal

Financial resource optimization seems opaque in that context. It probably relates to the fact that with the first wash of the Credit Suisse integration now being over, the numbers are starting to fall into place, and everyone can start getting back to work somewhat normally.

This phenomenon of getting overly technical is not limited to the outlook and the quarterly report. The lead page of the website and the media release shows much the same thing happening. Anyone reading each needs to be very familiar with many extremely specific three-letter acronyms.

Acronyms Galore

There are possibly many key investors who are fluent in PBTs, GWMs, P&Cs, NNAs, NNDs, and NCLs, but there are also even more who aren’t.

A key message from the media release verbatim: «USD 77bn of net new assets in GWM and USD 77bn of net new deposits across GWM and P&C since the closing of the acquisition in 2023; USD 22bn of NNA and USD 16bn of NND in GWM, and CHF 7bn of NND in P&C in 4Q23, driven by strong momentum with our clients».

Toning Things Down

That is a mouthful. And there is also a larger point here. Maybe UBS is trying to cool things down related to Credit Suisse in Switzerland and that would be commendable per se given how heated and emotional the discussion had become in some quarters. The current attempt to speak a language Wall Street understands might also be related to the bank's relative undervaluation related to key competitors such as Morgan Stanley, something finews.com recently commented on.

Still, there is also a danger of having that approach boomerang right back. For one, the reports may soon get to the point where they become unintelligible. Second, domestically, being overtly rational may not always play well in the context of possible job cuts and further restructuring, or even if the bank’s performance stutters - not with citizens or the government.