UBS's auditors have given an "adverse opinion" on the bank's internal controls for its 2024 financial reporting after it failed to fix issues from Credit Suisse, the Swiss lender confirmed on Monday.
The adverse opinion, a rare criticism for a global bank, warns investors that a company's financial statements may not accurately reflect its performance and health.
UBS had been addressing problems in Credit Suisse’s controls since acquiring the lender in a government-led rescue in 2023. In its annual report on Monday, UBS noted a significant weakness related to Credit Suisse's operations, hampering effective financial reporting.
Ernst & Young, UBS's auditor, stated that due to this weakness, UBS had inadequate internal financial controls by the end of 2024.
Analyst Andreas Venditti of Vontobel acknowledged this as one of the lingering challenges from the Credit Suisse acquisition.
The difficulties faced by UBS in integrating Credit Suisse underscore the hurdles in the post-2008 financial crisis era of complex banking mergers.
In the wake of an integration-related paperwork mistake earlier in January, UBS has recognized the need for additional controls and has been working on a remediation program to tackle these challenges.
Despite progress, the lingering weakness is centered around risk assessment within internal controls. UBS did not specify a timeline for resolving this weakness or associated costs.
UBS declined to comment further, while the Swiss Financial Market Authority (FINMA) noted intensive communication with UBS regarding the Credit Suisse integration.
Before the rescue, Credit Suisse faced scrutiny from U.S. authorities over reporting deficiencies, with questions raised on financial reporting practices under its former CFO, David Mathers, leading to subsequent challenges for both banks.
The 2022 Credit Suisse annual report included PwC's explicit assessment of internal control effectiveness that year.