Credit Suisse suffered $69bn in outflows during first-quarter crisis

Credit Suisse suffered SFr61.2bn ($68.6bn) of asset outflows in the first quarter as clients fled the stricken bank, exposing the scale of the task UBS now faces after taking over its Swiss rival.

The speed with which clients deserted Credit Suisse was the chief reason Swiss authorities stepped in last month to orchestrate a rescue sale to UBS.

In its first-quarter results released on Monday, Credit Suisse said that “these outflows, which were most acute in the days immediately preceding and following the announcement of the merger, stabilised to much lower levels, but had not yet reversed as of April 24, 2023”.

The bank’s flagship wealth management unit lost 9 per cent of assets in the first three months of the year. The reduced assets and fees the bank could generate on them would “likely lead to a substantial loss in wealth management in Q2 2023”, Credit Suisse said.

The $3.25bn takeover by UBS is the first time two global systemically important financial institutions have been brought together and is the most significant banking deal since the financial crisis 15 years ago.

Credit Suisse also confirmed on Monday that it had terminated its $175mn acquisition of M Klein & Co, the advisory business run by the bank’s former director Michael Klein. The deal had been structured as part of a plan for Credit Suisse to spin off much of its investment bank under the First Boston brand and be run by Klein.

The bank reported an adjusted SFr1.3bn pre-tax loss for the first quarter. On a non-adjusted basis, net income of SFr12.4bn for the quarter was distorted by a SFr15bn accounting gain the group made when bondholders were controversially wiped out as part of the rescue by UBS.

Holders of additional tier one capital notes — a debt instrument that can convert into equity — that have been hit have filed a lawsuit against Switzerland’s banking regulator, Finma, over the decision. It is expected to be the first of several claims over the next few years.

The move has temporarily boosted Credit Suisse’s common equity tier one ratio — an indicator of its financial resilience — from 14.1 per cent to 20.3 per cent.

Credit Suisse said: “In light of the merger announcement, the adverse revenue impact from the previously disclosed exit from non-core businesses and exposures, restructuring charges and funding costs, Credit Suisse would also expect the investment bank and the group to report a substantial loss before taxes in [the second quarter] and 2023.”

Separately, UBS said on Monday that Christian Bluhm, its chief risk officer who had announced he was standing down to become a full-time photographer, would instead stay in the role “for the foreseeable future” to help with the integration of Credit Suisse.

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