That doesn’t mean

UBS Group

(ticker: UBS) actually earned anything.

Virtually all the black ink came from “negative good will” on the Credit Suisse acquisition. That is to say UBS paid about $3 billion for Credit Suisse assets that it now reckons are worth $32 billion. Credit Suisse was just a big mess, not a black hole as panicked shareholders, depositors and Swiss regulators feared.

A mess it remains, though, which UBS needs to clean up before the combined group can reliably make money. “The profit number tells us that UBS did not really find any toxic assets on Credit Suisse’s balance sheet,” says Johann Scholtz, an analyst covering European banks at

Morningstar
.

“Management’s artwork starts now.”

Credit Suisse is still losing $2 billion every quarter, estimates Andreas Venditti, head of banks research at Bank Vontobel. The gaping wound is its investment bank, where revenue plummeted 78% year-over-year in the latest results, costs just 15%.

UBS CEO Sergio Ermotti aims to slash head count commensurately. But firing investment bankers is apparently expensive, too. UBS has earmarked $10 billion for “restructuring expenses,” Scholtz says.

Ermotti will try to cut around pieces of the investment bank that are thriving, like the U.S. leveraged finance practice.

UBS also added $4.5 billion in litigation provisions, preparing for the avalanche of lawsuits that followed Credit Suisse’s demise.

The good news is that Credit Suisse’s wealth management business, the likely reason UBS wanted it in the first place, looks to be stabilizing.

The division bled a quarter of its assets, some $200 billion, between October and May, as rich clients and relationship managers jumped ship, Venditti says. Flows for the past three months turned slightly positive.

UBS boasts a well-regarded management with deep restructuring experience. Ermotti rescued UBS itself from dire straits after taking the helm in 2011, shrinking a deadweight investment bank and doubling down on private banking. UBS brought him out of retirement in April to repeat the trick with Credit Suisse.

“Ermotti and his team have pretty much done this before,” Scholtz says. “Their strategy is absolutely sound.”

Analysts are divided on whether UBS stock has further to run. Scholtz has downgraded to three stars, Morningstar’s equivalent of Hold. He prefers more retail-oriented European banks like Netherlands-based

ING Groep

(ING) or

Lloyds Banking Group

(LYG) in the U.K., whose interest income is burgeoning as rates rise.

Gildas Surry, a portfolio manager at Axiom Alternative Investments, is “very constructive” on UBS. He likes the acquisition’s synergies in Swiss banking and wealth management, and a conservative approach to valuing Credit Suisse’s legacy assets. “The new combined franchise will be driven by massively positive operating leverage,” he says.

As an act of public-private crisis management, the Credit Suisse rescue looks like a ringing success. UBS waived a CHF 9 billion ($10.1 billion) loss backstop from the Swiss government last month. It has reduced job-loss estimates within Switzerland from 10,000 to 3,000.

Whether the combined bank becomes a humming profit machine servicing the world’s wealthy remains to be seen.