Credit Suisse reports $69bn of outflows before UBS takeover

BLOOMBERG 

Credit Suisse Group AG reported 61.2 billion francs ($69 billion) of outflows in the first quarter and took a large writedown at its wealth management unit, underscoring the challenge for UBS Group AG in retaining key clients and assets after the emergency takeover of its biggest rival.
The Swiss bank lost more than 200 billion francs ($224.77 billion) of customer deposits over a six-month period, culminating in several frantic days in March before the government-orchestrated sale. First-quarter results showed that its key units continued to lose money and shed clients, and the firm borrowed far more from a central bank liquidity backstop than previously known.
The figures give a fuller picture of the drama that ended Credit Suisse’s 167-year run as one of the most storied European banks and a sense of the work ahead for UBS. Ironically, in what may be its final quarter as a standalone company, Credit Suisse had a record 12.4 billion-franc profit, but only because of a gain tied to the controversial regulatory decision to wipe out many of its bondholders in the deal. Without that, it would have posted another loss.
Wealthy clients and retail depositors pulled billions from Credit Suisse in March after its anchor shareholder said it would not invest more in the company. That triggered the second crisis of confidence within months and ultimately led the Swiss government to broker the bank’s rescue because of fears it was heading towards bankruptcy.
The outflows and expected losses this year at key businesses such as wealth and investment banking are some of the clearest indications yet of the risks for UBS in an integration that the bank said may take up to four years. Chairman Colm Kelleher has already warned that the takeover is more challenging than many of the banking rescues that were executed during the 2008 financial crisis.
Still, UBS is paying about 3 billion francs for a firm that finished in March with a book value of 54 billion francs, giving it plenty of protection against further losses.
While Credit Suisse said that outflows have moderated but not yet reversed, it also lost about 6.9 billion at the Swiss unit, mostly at the private clients business, and a further 11.6 billion francs in asset management. The bank also took a 1.3 billion franc impairment charge mostly related to the wealth business.
At the end of the first quarter, Credit Suisse’s borrowings from the Swiss National Bank (SNB) totalled 108 billion francs, after it had repaid 60 billion francs
of borrowings, to support its liquidity levels. It repaid another 10 billion francs in April, after the quarter closed.