- Swiss authorities brokered the controversial 3 billion Swiss franc deal over a weekend in late March, after Credit Suisse’s deposits and share price collapsed amid fears of a global banking crisis.
- The acquisition is expected to be completed by the end of this year, if possible, but the full absorption of Credit Suisse’s business into UBS Group is expected to take about three to four years.
A Credit Suisse bank sign is seen on a branch building in Geneva, March 15, 2023.
Fabrice Coffrini | AFP | Getty Images
Credit Suisse on Monday revealed it suffered net asset outflows of 61.2 billion Swiss francs ($68.6 billion) during the first-quarter collapse that ended with an emergency bailout by local rival UBS.
The embattled Swiss lender reported a one-off profit of 12.43 billion Swiss francs for the first quarter of 2023, due to the controversial write-down of 15 billion Swiss francs of AT1 bonds by the Swiss regulator as part of the deal. Adjusted pre-tax loss for the quarter was 1.3 billion Swiss francs.
Swiss authorities brokered a controversial 3 billion Swiss franc bailout over a weekend in late March, after Credit Suisse’s deposits and share price collapsed amid fears of a global banking crisis triggered by the collapse of US lender Silicon Valley Bank.
In Monday’s earnings report, which could be the last in its 167-year history, Credit Suisse said it had experienced significant net asset outflows, particularly in the second half of March 2023, which were “moderate but still not yet addressed as of April 24, 2023.”
First-quarter net outflows amounted to 61.2 billion, 5% of the group’s assets under management at the end of 2022. Deposit outflows accounted for 57% of net asset outflows from Credit Suisse’s wealth management unit and the Swiss bank for the quarter.
“During the second half of March 2023, Credit Suisse experienced significant cash deposit withdrawals as well as non-renewals of maturing term deposits. Customer deposits fell by 67 billion Swiss francs in 1Q23,” the bank said.
“These outflows, which were sharpest in the days immediately before and after the merger announcement, stabilized to much lower levels but had not yet reversed as of April 24, 2023.”
The acquisition is expected to be completed by the end of this year, if possible, but the full absorption of Credit Suisse’s business into UBS Group is expected to take about three to four years.
UBS announced on Monday that its chief risk officer, Christian Blum, will stay on because of the planned acquisition of Credit Suisse, delaying the May 1 transfer 1 of Damien Vogel, who will now take up the newly created role of group risk control head of integration .
The deal remains mired in legal and logistical challenges, particularly around the write-down of Credit Suisse’s $17 billion AT1 bonds. Swiss regulator FINMA is facing legal action from bondholders over the decision to write down AT1s – widely regarded as relatively risky investments – to zero, while equity investors will receive payouts as part of the acquisition.
At the annual general meeting last month, chairman Axel Lehmann and chief executive Ulrich Koerner apologized to shareholders and staff. Both took up their posts in the past two years and inherited a bank rocked by a series of high-profile scandals, risk management failures and heavy losses.
Credit Suisse reported an annual net loss of 7.3 billion Swiss francs in 2022, including a loss of 1.4 billion in the fourth quarter alone, as Lehmann and Koerner sought a sweeping strategic overhaul aimed at strengthening its functions for risk and compliance and addressing persistent deficiencies in the investment bank.
Morningstar Equity analyst Johan Scholz highlighted that the first-quarter outflows marked an improvement over the last quarter of 2022, when Credit Suisse experienced net outflows of 111 billion Swiss francs.
“Wealth management clients withdrew 9% of their funds, while outflows from the Swiss bank (1%) and asset management businesses (3%) were more subdued. Customer deposits were down 29% in the quarter,” Scholz said in a note on Monday.
He added that one of the “missing pieces of the puzzle” was “the extent of the damage to the Credit Suisse franchise” during the banking turmoil in the first quarter.
“The majority of client outflows were related to deposits in the wealth management business. UBS will be pleased that the higher margin assets it invests on behalf of its wealth management clients have held up relatively well,” he said.
“Outflows from the Swiss bank and asset management businesses were also relatively limited. Credit Suisse pointed out that although outflows have slowed, this has not changed.’