Credit Suisse suffered a massive flight of funds of 68,300 million in the first quarter

Struck by a serious crisis which led to its sale UBSSwiss bank Credit Suisse reported this Monday asset losses of 61.2 billion francs in the first quarter of 2023, mainly caused by the withdrawal of deposits, especially on days when a purchase operation was agreed.

In its quarterly report, possibly the last issued by the 167-year-old bank before it was taken over by UBS, Zurich He pointed out that 57% of this net asset outflow corresponds to the withdrawal of deposits in both conventional banking and asset management.

Already in 2022, especially in the last months of that year, Credit Suisse recorded a liquidity outflow of 123,200 million francs (125,000 million euros), which contributed to a major crisis of confidence that would later lead to the sale to UBS.

The bank indicated today that as a result of these asset outflows, it suffered in the first quarter a a large reduction in deposits worth 67,000 million francs (68,300 million euros).

The sell-off accelerated the pullbacks

The bank admitted that the liquidity squeeze “was particularly acute in the days immediately before and after the announcement of the merger” (with UBS), agreed at the request of the Swiss government on March 19.

Significant deposit withdrawals “stabilized at much lower levels, but to date the situation has not yet been reversed,” the entity admits.

Credit Suisse recalled that due to the enormous outflow of funds from the bank, which in the worst moments of the crisis reached around 10 billion francs, it had to obtain a loan from Swiss National Bank (BNS, publisher).

As of March 31, according to the bank, this Credit the amount of 108,000 million francs (110,200 million euros).

He also emphasized that 70,000 million francs (71,400 million euros) have already been returned, of which 60,000 million francs were paid in the first quarter, and another 10,000 million in the current month of April.

Benefits due to forced withdrawals

However, the bank reported on some of them today net profit of 12,432 million Swiss francs (12,600 million euros) in the first quarter, although these gains are mainly explained by the reduction to zero of its AT1 liabilities, ordered by the Swiss authorities precisely to facilitate its purchase by UBS. In other words: forcing debtors to get haircuts.

Excluding certain extraordinary operations, the bank recorded an adjusted loss of 1.316 million francs (1.340 million euros) in the first quarter.

The liquidation of the AT1 bonds prompted a number of bondholders to file complaints against the Swiss authorities for the losses suffered or to announce their intention to do so, both inside and outside Switzerland.

Another extraordinary income related to the strong reported profit, according to the report, was the sale of a significant part of the securitized products of Credit Suisse to the New York company Apollo, as part of the restructuring process that tried to get the entity out of the crisis.

Huge losses in 2022

In 2022, Credit Suisse reported losses of 7,293 million Swiss francs (7,400 million euros).

Credit Suisse said it generated revenue of 18,467 million Swiss francs (18,800 million euros) in the quarter, four times more than in the same period in 2022, compared with operating expenses of just 5,620 million Swiss francs (5,300 million euros).

The entity’s total assets, according to the report, fell in the January-March period to 540,291 million francs (551,000 million euros), 27% less than a year ago.

Fusion

Credit Suisse said in its report that it continues are working together with UBS to ensure the merger is “completed on time”although he emphasized that this is subject to certain business closure operations which, according to both entities previously mentioned, could last for months.

On March 19, UBS bought Credit Suisse at the behest of the Swiss government for 3 billion francs (3.05 billion euros) to save it from bankruptcy.

Losses accumulated by the entity, along with numerous image scandals and a drop in investor confidence in the stock market after the crash in the United States Silicon Valley Bank and SignatureBankpushed the second largest bank in Switzerland into a serious crisis, which the government of that country tried to calm down with the help of UBS.

Credit Suisse’s results were released three days earlier than initially planned to come before those of its rival and buyer, UBS, due tomorrow on Tuesday.