Investors hope for answers in Credit Suisse and UBS results

When Credit Suisse’s unveils what are likely its final quarterly results on Monday, investors will be seeking clues to the magnitude of the challenges awaiting UBS, after it was strongarmed into taking over its stricken rival.

Credit Suisse pushed forward its result release to come out the day before those of UBS, as Switzerland’s largest bank prepares to swallow its long-time main domestic rival.

The results, which will be presented in a statement without the usual accompanying press conference and analyst discussion, will be closely studied for the mass withdrawals that took place as panic engulfed the bank last month, prior to the hastily arranged takeover.

Absorbing Credit Suisse will be a complex task, and “we won’t have all the answers we need,” Swissquote analyst Ipek Ozkardeskaya told AFP, pointing out that “the merger is fresh and (even) UBS didn’t have enough time to dive in Credit Suisse’s business”.

The answers to the many remaining questions around the depth of crises dogging Credit Suisse will arrive “gradually”, the analyst said, adding that she expected UBS over time “to take control of the situation and structure the bank in a healthy way.”

Credit Suisse had suffered a string of scandals over several years, and after three US regional banks collapsed in March unleashing market panic, it was left looking like the weakest link in the chain. Over the course of a nerve-wracking weekend, Swiss authorities organised an emergency rescue, pressuring UBS to agree to a $3.25-billion mega merger on the evening of March 19.

Justifying the move to parliament earlier this month, Swiss President Alain Berset said that “without intervention, Credit Suisse would have found itself, in all likelihood, in default on March 20 or 21”.

Monday’s quarterly report will likely be Credit Suisse’s last one, depending on how quickly the UBS deal closes, Vontobel analyst Andreas Venditti said in a research note.

He predicted that once released, “the market will focus on the magnitude of outflows across businesses”.

Some numbers are already circulating.

According to data compiled by US financial services firm Morningstar, the bank saw around 4.6 billion euros ($5.1 billion) withdrawn from funds during the month of March alone, marking the biggest monthly outflow on record.

Venditti said he expected Credit Suisse’s first quarter report to “reveal very weak underlying results”.

He estimated that the bank would post a net loss of around 700 million Swiss francs ($784 million), with an 800-million-franc gain from the sale of its Securitised Products Group helping it avoid falling far deeper in the red.

In 2022, the bank suffered a 7.3-billion-franc loss, with 110.5 billion francs in outflows in the final quarter alone.

That stood in stark contrast to the $7.6 billion profit raked in by UBS last year.

Venditti said he expected UBS on Tuesday to post a first quarter profit of nearly $1.7 billion, below the $2.1 billion it made during the same quarter a year ago.

He said he expected a poorer performance primarily due to “lower recurring fee income”, but said that would be “partially offset by higher net interest income” amid higher rates.

But investors will be most “interested in receiving additional details of the CS deal,” Venditti said, adding though that “we do not expect much additional information, given that the transaction has not closed yet.”

Analysts with the Zurich Cantonal Bank (ZKB) also acknowledged that UBS’s results would be “a sideshow”, with all eyes on “the uncertainties surrounding the planned merger with Credit Suisse”.

Separately, a group of Credit Suisse bondholders representing billions of dollars in high-risk debt that was wiped out in the bank’s rescue takeover by rival UBS are suing Switzerland’s banking regulator, their lawyers said on Friday.

Swiss authorities required that 16 billion Swiss francs ($17.9 billion) in so-called additional tier 1 (AT1) bonds be rendered worthless in the mega-merger of Switzerland’s two biggest banks, announced last month.

The order by the swiss Financial Market Supervisory Authority (FINMA) infuriated bondholders, who are typically better protected than shareholders.

But in this case, shareholders were not fully wiped out in the deal, though they did see the value of their holdings shrink drastically in the $3.25 billion takeover.

Lawyers for a group of swiss and international investors collectively representing more than a quarter of the wiped-out debt -- worth 4.5 billion swiss francs -- have now taken legal action against FINMA over that move.

Takeover talks: Swiss lender Zuercher Kantonalbank, known locally as ZKB, has held takeover talks with GAM Holding AG, the Financial Times reported on Saturday, citing people familiar with the matter.

ZKB is one of several companies considering a purchase of Zurich-headquartered asset manager GAM, the newspaper said. London-listed Liontrust Asset Management said earlier this week it was discussing a potential merger of its investment management unit with GAM.