Credit Suisse lost $68 billion in assets last quarter, outflows continue
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[April 24, 2023] By
Noele Illien
ZURICH (Reuters) -Credit Suisse said on Monday that 61 billion Swiss
francs ($68 billion) in assets left the bank in the first quarter and
that outflows were continuing, underscoring the challenge faced by UBS
Group in rescuing its rival.
Customer deposits declined by 67 billion francs in the quarter and the
bank noted many matured 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 was from its wealth management division and occurred across all
regions.The net asset outflow followed 110.5 billion francs pulled by
clients from the bank in the fourth quarter.
The 167-year-old bank reported results for what is likely to be the last
time, as its state-engineered marriage with UBS is expected to be
completed soon. Much of Switzerland's reputation as a trusted global
financial centre - particularly for the ultra wealthy - will rest on
whether the two globally important systemic banks can be successfully
integrated.
Shares in both UBS and Credit Suisse were up roughly 2% in morning
trade, with some analysts noting the outflows were not as bad as feared.
But others said the magnitude was alarming.
Credit Suisse's ability to generate revenue appeared to be so damaged
that "the deal could well remain a drag on UBS operating results unless
a deeper restructuring plan is announced," London-based analyst Thomas
Hallett at KBW said in a note to clients.
Assets managed by the flagship wealth management division plunged 29% to
502.5 billion francs at the end of March from the same period last year.
Clients rapidly started pulling money from scandal-plagued Credit Suisse
after it was ensnared in market turmoil unleashed by the collapse of
U.S. lenders Silicon Valley Bank and Signature Bank.
In the rescue package rushed together by Swiss authorities, UBS agreed
to take over Credit Suisse for 3 billion francs in stock and assume up
to 5 billion francs in losses. The deal also includes 200 billion francs
in state financial guarantees.
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A view shows the logo of Credit Suisse
on a building near the Hallenstadion in Zurich, Switzerland, April
4, 2023. REUTERS/Pierre Albouy/File Photo
Credit Suisse said that at the end of the first quarter, it had 108
billion Swiss francs of net borrowings from the central bank after
paying back 60 billion. Since then, it has paid back another 10
billion.
The bank, however, reported a pre-tax profit of 12.8 billion francs,
largely due to the controversial writedown to zero of AT1 bonds and
a gain from the sale of a big portion of its Securitized Products
Group to Apollo Global Management. When adjusted for these factors,
it had a loss of 1.3 billion francs for the quarter.
The wealth management and investment banking units will continue to
be loss-making in the second quarter, Credit Suisse said, adding
that the group is also expected to post a loss this year.
UBS, which has flagged that it expects the deal to bring $8 billion
in cost reductions by 2027, reports first-quarter earnings on
Tuesday. On Monday, it said that Christian Bluhm - whose departure
had been previously announced - will continue as its chief risk
officer for the "foreseeable future" to work on the takeover.
Other key facts from Credit Suisse's filing on Monday include:
- operating expenses increased 30% from the previous quarter which
the bank said was largely due to a goodwill impairment charge and
increases in compensation and benefits
- Private clients pulled 6.9 billion francs from the bank's Swiss
arm amid questions over the future of the Credit Suisse unit in
Switzerland
- Credit Suisse's planned $175 million acquisition of Michael
Klein's investment banking business was called off by mutual
agreement
- the bank had just over 48,000 full-time employees at the end of
the first quarter, a 5% decline from end-December
($1 = 0.8920 Swiss francs)
(Reporting by Noele Illien, John O'Donnell, Stefania Spezzati and
Miranda Murray; Editing by Emelia Sithole-Matarise and Edwina Gibbs)
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