The phenomenon of “badwill” has played a key role in UBS’s recent success. When UBS acquired Credit Suisse for $3 billion, it was seen as a great deal. UBS has now reported a record-breaking profit of $29 billion for the second quarter, attributed to badwill. Badwill occurs when a company buys an asset for less than its value, resulting in a noncash gain that recognizes the actual worth of the asset. While this massive profit is impressive, UBS still faces challenges as it works towards completing the acquisition and integrating Credit Suisse’s domestic bank. Unitng the two banks will result in the loss of 3,000 jobs, raising concerns about competition in the Swiss retail banking sector. However, UBS stands by its decision, stating that full integration is the best outcome for the bank, stakeholders, and the Swiss economy. On the other hand, Credit Suisse is struggling, reporting a pretax loss of $4.9 billion in the quarter due to customer withdrawals and challenges in investment banking. Despite these hurdles, UBS shareholders are pleased with the badwill gain, and the bank’s shares have risen by over 5%.
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