Credit Suisse saw US$69 billion in outflows at start of 2023

Ailing bank Credit Suisse on Monday reported over 61 billion Swiss francs (nearly US$69 billion) in outflows in the first three months of the year, when Switzerland’s government arranged for its takeover by rival UBS, and said clients are still withdrawing assets.

The Zurich-based bank cited the “significant net asset outflows” as it posted results skewed by an emergency rescue that was orchestrated by Switzerland’s financial markets regulator and included the wipeout of some 15 billion Swiss francs in higher-risk bonds. Some of those investors are now suing over the losses.

The takeover by UBS is expected to close in the coming months and was designed in part to help stabilize the global financial system that had been roiled by the collapse of two U.S. banks.

The reputation of 167-year-old Credit Suisse had been pummeled in recent years over stock price declines, a string of scandals and the flight of customers worried about the bank’s future.

The tailspin accelerated in mid-March after the head of the Saudi National Bank, which became a big investor in the Swiss bank last fall, said it wouldn’t provide more money to Credit Suisse. The Saudi bank chairman later resigned, citing “personal reasons.”

On Monday, Credit Suisse said net asset outflows of 61.2 billion francs in the first quarter — the UBS takeover was hastily announced on March 19 — amounted to about 5% of all of its assets under management.

The outflows “have moderated but have not yet reversed,” the bank said.

As of March 31, Credit Suisse said it had borrowed 108 billion francs from the Swiss central bank, whose guarantees were a pillar of the rescue plan that helped avoid a possible collapse of Switzerland’s second-largest bank. That total follows repayments of 60 billion francs, and the bank says it has paid back a further 10 billion this month.

Credit Suisse posted pretax profit of 12.8 billion francs in the quarter, stemming almost entirely from writing down the higher-risk bonds. Otherwise, it had a pretax loss of 1.3 billion francs.

Customer deposits also dropped by 67 billion francs in the three-month period.

“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,” the bank said in a summary of its results.

Turmoil at the bank has simmered down, but challenges for Credit Suisse and the takeover deal have not.

Last week, investors holding more than 4.5 billion francs in higher-risk Credit Suisse bonds sued Swiss financial regulators in one of several court complaints over the wipeout.

U.S. lawmakers also accused the bank of limiting the scope of an internal investigation into Nazi clients and Nazi-linked accounts, including some that were open until just a few years ago.

A week earlier, Switzerland’s lower house of parliament issued a symbolic rebuke of the emergency rescue plan spearheaded by the executive branch.

UBS, which reports its first-quarter earnings Tuesday, has laid out the challenges of taking over its main competitor — the two big banks each have headquarters at Zurich’s Paradeplatz square — but insists that the deal will benefit UBS shareholders.

Colm Kelleher, the Irish-born chairman of UBS, said this month that the union of the two banks amounts to the most complex deal in global finance since the 2007-2008 financial crisis.

Banking analysts and financial academics expect job cuts and an administrative thicket ahead for UBS as it carves up and integrates Credit Suisse, while scrapping unwanted assets.