In an audacious reveal, Credit Suisse has forecasted a whopping $2.2 billion loss for the third quarter as repercussions emerge from the takeover by UBS. If ever there was a clear testament to the tumultuous terrain of bank mergers, this is it.
The Rundown of Credit Suisse’s Losses
Diving into the details, the significant losses come from multiple fronts. A substantial portion, about $1.6 billion, originates from departing loans.
These were previously nestled under the “bad bank” category in the non-core and legacy unit. For the uninitiated, this unit is the veritable dumping ground for financial dealings that don’t align with UBS’s refined strategies and standards.
But the financial setbacks don’t end there. Another estimated loss of up to $600 million looms over Credit Suisse for the third quarter. The bank attributes this sizable loss to a move of winding down particular managerial undertakings.
Insider sources point fingers at the sale of the securitised products division to Apollo last year as the catalyst. Stepping back, it’s worth noting the scale and significance of this merger.
UBS, in a dramatic and state-backed move, took over its perennial competitor, Credit Suisse. This move marks one of the boldest bank mergers since the notorious global financial crisis that shook the world over a decade ago.
On the bright side for UBS, this move wasn’t without its perks. They reported a staggering $29 billion profit in Q3, with most of it being an accounting boon from the Credit Suisse acquisition.
This profit is the kind of number that raises eyebrows and has unsurprisingly propelled UBS shares upwards, even touching a 15-year pinnacle.
A Workforce in Flux
It’s not just Credit Suisse’s financial sheets that are undergoing transformation. The staff count is dwindling too. Over the first half of the year, the bank’s full-time employee numbers plummeted from 38,908 to 33,968.
However, the catch is, these figures exclude the back-office division, which has transitioned to fall under UBS’s expansive umbrella. Notably, at the onset of the year, the count stood at an impressive 50,480. One can only wonder where these numbers will stand by year’s end.
While Credit Suisse grapples with these setbacks, UBS, on the other hand, has its eyes set on the future. They have ambitious plans to wrap up the bulk of the Credit Suisse integration by 2026.
And as they cherry-pick the profitable sectors of Credit Suisse, they have shown a keen interest in retaining the bank’s domestic business.
But with such extensive integration, financial turbulence is inevitable. Credit Suisse, in its recent half-year report, forewarned about potential further impairments and writedowns, touching upon assets from goodwill to real estate.
Meanwhile, UBS gears up to unveil its Q3 results on November 7. CEO Sergio Ermotti has also hinted at an announcement regarding the bank’s triennial strategy, slated for next February.
In wrapping, the financial landscape is never dull. The UBS and Credit Suisse saga is a stark testament to this fact. As these banking behemoths navigate their intertwined futures, observers can only anticipate what the next financial report will reveal.
For now, Credit Suisse’s $2.2 billion bombshell serves as a sobering reminder of the complex aftermaths of major mergers.
