Credit Suisse, now a part of UBS, expects to report a third-quarter loss of approximately $1.6 billion due to the reclassification of loans related to its non-core and legacy businesses, as announced on Friday. The bank also foresees a potential loss of up to $600 million from the decision to wind down certain management arrangements in the same quarter.
Earlier this year, in March, UBS agreed to acquire Credit Suisse for three billion Swiss francs and take on up to five billion francs in losses. This move was part of a rescue effort coordinated by Swiss authorities as Switzerland's second-largest bank was teetering on the brink of collapse. Post-acquisition, UBS determined which Credit Suisse assets it would keep and which would be transferred into a non-core and legacy division for gradual winding down.
Lukas Gehwiler, UBS' vice chairman, suggested earlier this month that Credit Suisse might incur additional losses in the second half of the year. In response to potential losses from ongoing litigation, Credit Suisse increased its provisions to 1.48 billion Swiss francs, up from 1.367 billion francs reported in its half-year figures at the end of August.
The bank is currently involved in several cases, including its dealings with US family office Archegos Capital Management and loans granted to Mozambique for the development of its fishing industry.
In its financial report for the first half of 2023, Credit Suisse reported net asset outflows of 100.3 billion Swiss francs from the end of 2022. The wealth management business experienced the largest outflow with 74 billion francs withdrawn across all regions.
UBS shares listed in Zurich were minimally impacted by the news, even showing a slight increase around noon on Friday. Since the announcement of the Credit Suisse takeover in March, the UBS share price has risen by over 30%. According to InvestingPro data, the UBS share price has seen a significant return of 34.98% year-to-date and a 71.79% return over the last year. The company's market capitalization stands at $80.4 billion USD, with a P/E ratio of 2.35.
InvestingPro Tips for UBS highlight that the company is profitable over the last twelve months and has been trading at a low Price/Book multiple. This suggests that despite the potential losses from the Credit Suisse acquisition, the company maintains a strong financial position. For more insights like these, readers can visit InvestingPro which offers 8 additional tips for UBS.
As of June, Credit Suisse had a workforce of 33,968 employees, marking a reduction of about 13% compared to the same period a year earlier. According to InvestingPro, UBS's next earnings date is slated for November 7, 2023, where more detailed financial insights will be revealed.
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