Investors hope for answers in Credit Suisse, UBS results


By AFP
Published April 22, 2023

Credit Suisse had suffered a string of scandals over several years

 - Copyright AFP/File Fabrice COFFRINI

Nathalie OLOF-ORS

When Credit Suisse’s unveils what are likely its final quarterly results Monday, investors will be seeking clues to the magnitude of the challenges awaiting UBS, after it was strongarmed into taking over its stricken rival.

Credit Suisse pushed forward its result release to come out the day before those of UBS, as Switzerland’s largest bank prepares to swallow its long-time main domestic rival.

The results, which will be presented in a statement without the usual accompanying press conference and analyst discussion, will be closely studied for the mass withdrawals that took place as panic engulfed the bank last month, prior to the hastily arranged takeover.

Absorbing Credit Suisse will be a complex task, and “we won’t have all the answers we need,” Swissquote analyst Ipek Ozkardeskaya told AFP, pointing out that “the merger is fresh and (even) UBS didn’t have enough time to dive in Credit Suisse’s business”.

The answers to the many remaining questions around the depth of crises dogging Credit Suisse will arrive “gradually”, the analyst said, adding that she expected UBS over time “to take control of the situation and structure the bank in a healthy way.”

– ‘Very weak’ –

Credit Suisse had suffered a string of scandals over several years, and after three US regional banks collapsed in March unleashing market panic, it was left looking like the weakest link in the chain.

Over the course of a nerve-wracking weekend, Swiss authorities organised an emergency rescue, pressuring UBS to agree to a $3.25-billion mega merger on the evening of March 19.

Justifying the move to parliament earlier this month, Swiss President Alain Berset said that “without intervention, Credit Suisse would have found itself, in all likelihood, in default on March 20 or 21”.

Monday’s quarterly report will likely be Credit Suisse’s last one, depending on how quickly the UBS deal closes, Vontobel analyst Andreas Venditti said in a research note.

He predicted that once released, “the market will focus on the magnitude of outflows across businesses”.

Some numbers are already circulating.

According to data compiled by US financial services firm Morningstar, the bank saw around 4.6 billion euros ($5.1 billion) withdrawn from funds during the month of March alone, marking the biggest monthly outflow on record.

Venditti said he expected Credit Suisse’s first quarter report to “reveal very weak underlying results”.

He estimated that the bank would post a net loss of around 700 million Swiss francs ($784 million), with an 800-million-franc gain from the sale of its Securitised Products Group helping it avoid falling far deeper in the red.

– UBS results ‘a sideshow’ –

In 2022, the bank suffered a 7.3-billion-franc loss, with 110.5 billion francs in outflows in the final quarter alone.

That stood in stark contrast to the $7.6 billion profit raked in by UBS last year.

Venditti said he expected UBS on Tuesday to post a first quarter profit of nearly $1.7 billion, below the $2.1 billion it made during the same quarter a year ago.

He said he expected a poorer performance primarily due to “lower recurring fee income”, but said that would be “partially offset by higher net interest income” amid higher rates.

But investors will be most “interested in receiving additional details of the CS deal,” Venditti said, adding though that “we do not expect much additional information, given that the transaction has not closed yet.”

Analysts with the Zurich Cantonal Bank (ZKB) also acknowledged that UBS’s results would be “a sideshow”, with all eyes on “the uncertainties surrounding the planned merger with Credit Suisse”.