Credit Suisse reported outflows of 61.2 billion Swiss francs ($69 billion) in the first quarter and took a massive writedown on its wealth management unit, underscoring the challenges UBS faces in retaining key clients and assets following an emergency administration. challenge.
UBS reported a net outflow of 47.1 billion Swiss francs in wealth management, traditionally its most valuable business, and said a 1.3 billion Swiss franc impairment charge was mostly related to the unit.
The bank raised its profit warning for the business, saying it expected “significant” losses in the business and across the group this year.
Wealthy clients and retail savers pulled billions of dollars from Credit Suisse in a frenzied few days in March after Saudi shareholders, its main shareholder, said they would not invest more in the company.
It was the second crisis of confidence in the bank in as many months, culminating in the Swiss government mediating a bailout of its biggest rival on fears Credit Suisse would go bankrupt.
The scale of the outflows and losses underscores the risks UBS faces in terms of consolidation, which the bank has said could take up to four years, which UBS Chairman Colm Kelleher believes is much faster than what was executed during the 2008 crisis. Bank takeovers are more difficult.
While Credit Suisse said outflows had slowed but not yet reversed, its Swiss unit also lost about 6.9 billion Swiss francs in outflows, mostly from its private client business, and another 11.6 billion from its asset management business.
The bank reported a pre-tax profit of 12.8 million Swiss francs in the first quarter, helped by a write-down of 15 billion Swiss francs of additional Tier 1 capital notes to zero when UBS acquired Credit Suisse.
The move proved hugely controversial, with many investors pursuing legal options even after the Swiss government insisted it was consistent with rights under securities contracts. Without adjustments, Credit Suisse posted a loss of 1.3 billion Swiss francs for the quarter.
At the end of the first quarter, Credit Suisse borrowed a total of 108 billion Swiss francs from the Swiss National Bank to support its liquidity levels after repaying 60 billion Swiss francs. It repaid another CHF10 billion in April after the quarter ended.
The central bank’s support was not enough to stop the bailout deal as Credit Suisse’s customer deposits more than halved in six months, falling by another $67 billion in the first quarter.
Credit Suisse began its latest restructuring in October, including cutting as many as 9,000 jobs, as it seeks to return to profitability.
The continuation of asset exits and banker departures is now raising questions about the state of the wealth business that UBS will inherit. Credit Suisse warned on Monday that recent developments had already increased staff turnover.
To help stem the brain drain, UBS wealth chief Iqbal Khan appeared at a town hall alongside his Credit Suisse counterparts, telling key staff that the new owner would offer incentives and retention packages.
The involvement of Khan, who previously ran the international wealth business at Credit Suisse, suggests UBS fears rivals will use the drama to poach staff and clients.
Doubts on social media about Credit Suisse’s financial stability sparked a wave of withdrawals, resulting in a loss of about 110 billion Swiss francs in client assets in the fourth quarter.
Citigroup analysts estimated ahead of Monday’s announcement that Credit Suisse could lose another 110 billion Swiss francs, about a fifth of its client assets, after the merger with UBS.