By
Bhushan Akolkar
April 12th, 2024
While there are plans in place to repay shareholders following the Credit Suisse acquisition by UBS, many may be unable to quantify their losses because of the bank’s collapse.
Swiss multinational financial services giant Credit Suisse Group AG (SWX: CSGN) has shared more insights into its finances for the first quarter with outflows that marked an end to its reign. According to the insolvent bank, it recorded a total of 61.2 billion Swiss francs ($68.6 billion) in total net outflows for the first quarter of this year.
This outflow was precipitated by age-long turmoil within the bank that has left depositors and investors skeptical about the viability of the bank’s financial health. The bank runs the firm experienced also stems from the spillover from the United States which saw the collapse of three prominent banks particularly, Silicon Valley Bank (SVB).
The sell-off represented a cover from depositors who did not want to be caught in the web of bankruptcy in case the firm slipped into one. While the company said the rate of withdrawals has been tapered down, the amount is yet to return to normal levels.
“In the second half of March 2023, Credit Suisse experienced significant withdrawals of cash deposits as well as non-renewal of maturing time deposits. Customer deposits declined by CHF 67 bn in 1Q23,” the bank said, adding that “These outflows, which were most acute in the days immediately preceding and following the announcement of the merger, stabilized to much lower levels, but had not yet reversed as of April 24, 2023.”
In order to protect Credit Suisse as well as its overall financial ecosystem, Swiss regulators helped the broker to sell off the bank to its local rival – UBS Group AG (SWX: UBSG). The selloff was valued at 3 billion Swiss francs ($3.2 billion) and while the acquisition will not be consummated until later in the year, the report has it that the full absorption of Credit Suisse’s business will span several years.
Beyond Outflows: the Way Forward for Credit Suisse
Credit Suisse was arguably one of the oldest banks in Switzerland with close to a 167-year history. While the collapse is a historic one, the need to help safeguard its business integrity and continuity by both UBS and the regulators has been a delight for investors across the board.
Following the acquisition, UBS named Sergio Ermotti as the new Chief Executive Officer of the troubled firm to help supervise the process of the takeover. As a means to ensure a smooth takeover, UBS has also announced that its supposedly outgoing Group Chief Risk Officer Christian Bluhm will stay back at the firm because of the acquisition.
On the part of Credit Suisse, top management including Chairman Axel Lehmann and CEO Ulrich Koerner extended apologies to the bank’s stakeholders, especially those whom the bank’s failures have hurt the most.
While there are plans in place to repay shareholders following the acquisition, many may be unable to quantify their losses because of the bank’s collapse.