Swiss bank Credit Suisse has released its Q1 2023 earnings report, which details massive net outflows of CHF 61.2 billion ($68.6 billion) in the quarter. These outflows represent 5% of the group’s assets under management as of the end of 2022, and were caused by deposit outflows representing 57% of the net asset outflows from Credit Suisse’s wealth management unit and Swiss bank. The report also notes that these outflows have moderated but not yet reversed as of April 24, 2023.
These developments come after Credit Suisse’s emergency rescue by domestic rival UBS in late March, in the wake of a collapse in Credit Suisse’s deposits and share price. Swiss authorities brokered the controversial CHF 3 billion rescue deal, which has caused a flurry of legal and logistical challenges surrounding the wipeout of $17 billion of Credit Suisse AT1 bonds. Swiss regulator FINMA now faces a lawsuit from bondholders over the decision to write the AT1s down to zero, while stock investors will receive payouts as part of the takeover.
The Q1 earnings report also indicates that Credit Suisse’s acquisition by UBS is expected to be consummated by the end of this year, but the full absorption of Credit Suisse’s business into UBS Group is likely to take around three to four years. UBS announced on Monday that its Group Chief Risk Officer Christian Bluhm will remain in post due to the planned acquisition of Credit Suisse, delaying a planned May 1 handover to Damien Vogel, who will now take up the newly-created role of group risk control head of integration.
Morningstar Equity Analyst Johann Scholtz noted that the first-quarter outflows marked an improvement on the final quarter of 2022, when Credit Suisse suffered net outflows of CHF 111 billion. However, one of the “missing pieces of the puzzle” is the “extent of the damage to the Credit Suisse franchise” during the banking turmoil of the first quarter. Scholtz added that Credit Suisse’s outflows from its Swiss bank and asset management business were also relatively contained, and that UBS will be pleased that the higher-margin assets it invests on behalf of its wealth management clients held up reasonably well.
Credit Suisse posted a one-off CHF 12.43 billion profit for the first quarter of 2023, due to the controversial write-off of CHF 15 billion of AT1 bonds by the Swiss regulator as part of the deal. However, the adjusted pre-tax loss for the quarter came in at CHF 1.3 billion, indicating that the bank is still struggling to recover from a series of high-profile scandals, risk management failures and heavy losses. Chairman Axel Lehmann and CEO Ulrich Koerner both apologized to shareholders and staff at the bank’s annual general meeting last month.
The Q1 earnings report could be the last in Credit Suisse’s 167-year history, as the bank’s future remains uncertain in the wake of the UBS acquisition. However, Credit Suisse said in the report that it experienced significant withdrawals of cash deposits as well as non-renewal of maturing time deposits in the second half of March 2023. The bank remains committed to making improvements to its risk and compliance functions and addressing underperformance in its investment bank.