The (rescue) deal may be a drag on UBS’s operating results unless a deeper restructuring plan is announced.”
Thomas Hallet, KBW analyst.
Credit Suisse mentioned yesterday, April 24, that 61 billion Swiss francs ($68 billion) in assets left the bank in the first quarter and that the outflows continue, underscoring the challenge UBS Group faces in rescuing its rival.
Customer deposits fell by 67 billion francs in the quarter and the bank said many past due time deposits had not been renewed.
“These outflows have moderated but have not yet reversed as of April 24, 2023,” Credit Suisse said, adding that most of the money leaving the bank came from its wealth management division and occurred across all regions. The net outflow of assets came after clients withdrew 110.5 billion francs from the bank in the fourth quarter.
The 167-year-old bank presented its results for the last time as its state-sponsored merger with UBS is expected to be finalized soon. Much of Switzerland’s reputation as a trusted global financial center (particularly for the ultra-rich) will depend on whether the two globally important systemic banks can successfully integrate.
Shares of UBS and Credit Suisse were up about 2% in trading yesterday morning with some analysts saying the outflows were not as bad as feared; however, others noted that the magnitude was alarming.
Credit Suisse’s ability to generate revenue seemed so damaged that “the deal may be a drag on UBS’s operating results unless a deeper restructuring plan is announced,” said London-based KBW analyst Thomas Hallett. , in a note to clients.
Assets under management by the flagship wealth management division plunged 29%, to 502.5 billion francs, at the end of March from the same period a year earlier.
Clients quickly began withdrawing money from scandal-plagued Credit Suisse after it became embroiled in market turbulence sparked by the failure of US lenders Silicon Valley Bank and Signature Bank.
In the hastily agreed bailout package from Swiss authorities, UBS agreed to take over Credit Suisse for 3 billion francs in shares and take up to 5 billion francs in losses. The agreement also includes 200,000 million in state financial guarantees.
Credit Suisse stated that, at the end of the first quarter, it had 108 billion Swiss francs of net borrowing from the central bank, after repaying 60 billion. Since then, it has returned another 10 billion.
The bank, however, posted a pre-tax profit of 12.8 billion francs, due largely to the controversial zeroing of AT1 bonds and a gain from the sale of a large part of its Securitized Products Group to Apollo. Global Management. After adjusting for these factors, it posted a loss of $1.3 billion.
