Credit Suisse said that “significant drawdowns of net assets” were particularly large in the second half of March, when panic set in ahead of the hastily made takeover.
Tens of billions of dollars were withdrawn from Credit Suisse in the first three months of 2023, according to the latest quarterly results announced by the bank on Monday, likely before its rival UBS acquired it. The second largest bank in Switzerland recorded withdrawals of 61.2 billion Swiss francs, or about $68.6 billion, in the first quarter alone.
At the same time, the bank’s net profit rose to 12.4 billion francs, after a large loss last year, thanks to the acquisition of high-risk Credit Suisse debt, as part of the deal with UBS. Investors were awaiting the results to see indications of the scale of the challenges that UBS faces.
Credit Suisse said the “significant drawdowns of net assets” were particularly large in the second half of March, when panic set in ahead of the hastily made takeover.
He added in his return report, “Withdrawals calmed down, but the movement until April 24, 2023 had not returned to what it was.” At the same time, the bank said its net profit rose to 12.4 billion francs.
As part of the massive merger between the two Swiss banks last month, the Swiss authorities demanded that 16 billion Swiss francs ($17.9 billion) of “Additional Tier 1 Capital Notes” (AT1) be deemed worthless.
The decision by the Swiss Financial Market Supervisory Authority (FINMA) angered bondholders, who launched legal action against the regulator.
Expect “big” losses.
Credit Suisse said that its quarterly results were also strengthened by selling part of its securitized financial assets (the securitization is based on converting debts into sukuk and bonds and putting them on the market to obtain liquidity), to the “Apollo Global Management” company. Even so, the bank said it incurred a pre-tax loss of a quarter of the CHF1.3 billion.
The bank, which last October launched a broad restructuring plan including the creation of its investment arm, said the branch suffered an adjusted pre-tax loss of 337 million in the first quarter.
And he warned that “in light of the merger announcement and the negative impact on revenues (…) and restructuring fees and financing costs,” it is expected to record “tangible” losses in the second quarter and in general at the level of all of 2023. The quarterly report issued on Monday may be the last Credit Suisse report, depending on how long it will take to finalize the merger with UBS.
bad situation
Credit Suisse has been exposed to a number of scandals in the past years, and after the collapse of three local US banks sparked panic in the financial markets, the bank seemed the weakest link in the chain.
During a frantic weekend, Swiss authorities orchestrated an emergency bailout and pressured UPS to agree to a major merger worth $3.25 billion on the night of March 19.
Justifying the decision to Parliament earlier this month, Swiss President Alain Berset said, “If it weren’t for the intervention, Credit Suisse would probably have found itself in default on the 20th or 21st of March.”
In 2022, Credit Suisse suffered a loss of CHF7.3 billion, with CHF110.5 billion of withdrawals recorded in the last quarter alone. That’s a stark contrast to the $7.6 billion in profits UPS reported last year. UBS is expected to publish its first-quarter results on Tuesday.
Analysts at Zurich Cantonal Bank acknowledge that UBS’ results will be a “side show”, as attention is drawn to “doubts surrounding the planned merger with Credit Suisse”.
Vontobel analyst Andreas Vendetti agrees, warning in a research note that the Credit Suisse report “reveals the dire state of the organisation”.
