Credit Suisse, which was recently acquired by UBS, announced that it is anticipating a third-quarter loss of approximately $1.6 billion due to the reclassification of loans associated with its non-core and legacy businesses. The bank also disclosed that it had decided to wind down certain management arrangements, potentially resulting in a loss of up to $600 million in the same quarter. UBS agreed to acquire Credit Suisse at a discounted price of 3 billion Swiss francs and to take on up to 5 billion francs in losses to prevent the financial institution from collapsing. Following the acquisition, UBS has determined which assets of Credit Suisse it will retain and which will be placed in a non-core and legacy division to be gradually wound down.
Furthermore, Credit Suisse increased its provisions for potential litigation losses to 1.48 billion Swiss francs, an increase from the 1.367 billion francs reported in its half-year figures in August. The bank is currently involved in various legal cases, including its dealing with U.S. family office Archegos Capital Management and loans granted to Mozambique for the development of its fishing industry. Additionally, Credit Suisse experienced net asset outflows of 100.3 billion Swiss francs in the first six months of 2023, with the wealth management business witnessing the biggest outflow of 74 billion francs as customers withdrew funds prompted by eroded confidence in the bank. The Swiss domestic business also suffered a net outflow of 14.6 billion francs.
These developments reveal the significant financial challenges faced by Credit Suisse, both in terms of losses from reclassifying loans and potential litigation expenses. The acquisition by UBS was orchestrated to prevent a collapse but also means that Credit Suisse’s assets will be carefully evaluated, with some being gradually phased out. The increase in provisions for potential losses from litigation indicates that the bank is anticipating further legal challenges as it deals with ongoing cases. Additionally, the substantial net asset outflows demonstrate the loss of trust and confidence from customers, particularly in the wealth management sector. The precarious financial situation of Credit Suisse necessitates careful management and strategic decisions moving forward.