Credit Suisse reported outflows of 61.2 billion Swiss francs (62 billion euros) in the first quarter of this year and took a massive writedown on its wealth management unit, underscoring UBS’s struggle to retain key clients after rushing to buy its biggest rival and asset challenges.
The Swiss bank lost more than 200 billion Swiss francs in customer deposits in six months, culminating in a frenzied few days of trading ahead of a government-orchestrated sale in March.
First-quarter results showed that its main division continued to lose money and lose customers, and that the company had borrowed far more from central bank liquidity support than previously known.
The figures paint a fuller picture of the drama that ended Credit Suisse’s 167-year history as one of Europe’s most prominent banks, and shed some light on the future of work at UBS.
Ironically, in what is likely to be the last quarter as an independent company, Credit Suisse posted a record 12.4 billion Swiss franc profit, but only because of gains related to a controversial regulatory decision that wiped out Many bondholders in the deal. Otherwise, it will lose money again.
Wealthy clients and retail savers pulled billions of dollars from Credit Suisse last month after its main Saudi shareholder said it would not invest more in the company.
That sparked a second crisis of confidence in as many months and eventually led the Swiss government to bail out the bank amid fears it was headed for bankruptcy.
“The scale of the losses and outflows is concerning,” Keefe, Bruyette & Woods analysts including Thomas Hallett wrote in a note to investors. “With such disruption to the revenue trajectory, unless a deeper restructuring plan is announced, the deal is likely to continue to be a drag on UBS’s operating performance.”
Outflows and expected losses this year from key businesses such as wealth and investment banking are some of the clearest signs of risk for UBS in the consolidation process, which the bank says could take up to four years. UBS Chairman Colm Kelleher has already warned that the takeover would be more challenging than many of the banking bailouts enacted during the 2008 financial crisis.
Still, UBS paid around 3 billion Swiss francs for a company with a book value of 54 billion Swiss francs in March, giving it ample protection against further losses. Some observers thought the results were better than expected.
Reiterating his Outperform rating, Zurcher Kantonalbank analyst Michael Klien said the outflows were “less than feared.”