Fund outflows of $4.4bn at Credit Suisse since UBS deal

BLOOMBERG

Credit Suisse Group AG saw clients pull $4.4 billion from US and European funds since the lender agreed to be acquired by rival UBS Group AG in March, with recent inflows suggesting the worst of the bleeding may be over.
Credit Suisse’s European funds suffered $3.8 billion in net redemptions between March 20 and April 6, while US funds saw another $575 million out the door, according to data from Morningstar Inc. The figures only include funds that report daily numbers and don’t represent the full universe of Credit Suisse asset management.
The outflows underscore the challenge for the combined firm to retain clients, after UBS agreed to acquire its local rival in an emergency, government-backed takeover. UBS Chairman Colm Kelleher has said it will likely take months to close the deal and as much as four years to complete the integration.
The largest daily outflows were recorded on March 21, two days after the transaction was announced, when $813 million were pulled. Since then, redemptions have eased and about $230 million came back on April 5 and 6.
“Credit Suisse’s outflows are less than I would have expected,” said Johann Scholtz, an equity research analyst at Morningstar. The absolute number “sounds dramatic” but outflows are only around 2.5% of the firm’s assets under management, he said.
Separately, the Swiss parliament’s refusal to sign off on state guarantees for UBS’s takeover of Credit Suisse might not have been completely symbolic as increased market uncertainty apparently led the two banks to draw more liquidity from the central bank.
Sight deposits of domestic banks at the Swiss National Bank (SNB) grew by some 16 billion francs ($18 billion), according to SNB data. The most likely reason for this increase of money in circulation is that UBS and Credit Suisse took more liquidity from facilities SNB provided to them, according to Karsten Junius, chief economist at Bank J Safra Sarasin.
Meanwhile, UBS said it will use some shares that it had repurchased over the past year to finance the acquisition of Credit Suisse Group AG, after the Swiss regulator approved a change to its buyback plan.
The lender had bought back about 299 million shares under a program started a year ago. It needs about 178 million own shares for Credit Suisse takeover and had asked Swiss Takeover Commission to use some repurchased shares for the deal instead of cancelling them.