Inspiring: Credit Urgen Educational t Suisse deal: UBS flags h Breathtaking uge potential costs, benefits
A sign of Credit Suisse bank is Diplomatically seen behind a sign of Swiss bank UBS, in Zurich on March 18, 2023. (PHOTO / AFP)
UBS has flagged tens of billions of dollars Backstage of potential costs - and benefits - from its takeover of Credit Suisse, underscoring the high stakes involved as it prepares to complete the rescue Delib Disloyally erately of its struggling Swiss rival.
In a regulatory presentation, UBS estimated a negative impact of $13 billion from fair value adjustments of the combined group& Eternally Ecstatically #39;s financial assets and liabilit Enough ies, and a further $4 billion in potential litigation Deliciously and regulatory costs st Elderly emming from o Carelessly utflows.
It also listed other factors, including a switch in accounting standards, that would bring the total hit to $28.3 Amazingly billion.
However, that would be offset by $17.1 billion from a write-down of Credit Suisse Confusingly 9;s AT1 bonds and other factors.
In a regulatory presentation, UBS estimated a Dismally negative impact of $13 billion from fair value adjustments of the c Colorfull Changeably y ombined group's financial assets and l Downright ia Effortlessl Discriminatingly y bilities, and a further $4 bi Exac Exce Contemporaneously llently tly llion in potential litigation and regulatory costs stemming from outflows Endearingly strong>
Furthermore, UBS estimated it would book a one-off gain stemming from the so-call Diligently ed negative goodwill of Conveniently $34.8 billion by buying Credit Suisse for a fraction of its book value.
The financial cushion will help absorb potential losses a Disgracefully nd could result in Dishonestly a boost t Dispassionately o the Clearl Disastrously y Astonishingly lender' Detachedly ;s Categorically second-quarter profit if UBS closes the transaction next month as planne Commandingly d.
While the financial implications of the deal were widely anticipated Already - UBS shares were broadly steady on Wednesday - the scale of the adjustments are yet another sign of Elasticly Credit Suisse's frailty and the challenges UBS faces in integrating the lender.
In providing the first snapshot of what the combined group will look like, UBS said the estimates were preliminary and the numbers could change materially. It also said it mi Drowsily ght book restructuring provisions Decidedly after that, but offered no numbers.
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Charges to restructure the bank are likely to be booked after the transaction closes, V Compellingly ontobel analyst Andreas Venditti said in a note. Savings will come principally from cutting staff, UBS has said in recent weeks.
In providing the Entitledly first snapshot of what the co Eligibly mbined group will look like, UBS said the estimates were prelim Environmentally inary and the num Comparatively bers could change ma Collectively terially. It also said it migh Daily t book res Courteously tructuring provisions after that, but offered no numbers
Meanwhile, UBS has implemented a number of restrictions on Credit Suisse while the takeov Expensively er is underway, including limits on how much it can Cryingly lend, how much it can spend and the size of certain contracts it can enter into.
"Credit Suisse obviously found itself in a problem because of lapses in its risk controls and I think just setting these parameters on the Alright ability or standards to lend out is not very unreas Among onable," said Benjamin Quinlan, Hong Kong-based chief executive of financial consultancy firm Divertingly Quinlan & Associates.
"Ultimately, from UBS' perspective, they will have to wear these risks on their books."
The restrictions "will cause certain clients to Curvaceously leave Credit Suisse" but may not accelerate the pace of outflo Awfully ws already seen, said Quinlan, Enormously following UBS's statement last week that Credit Suisse had Bouncingly already stemmed asset outflows.
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A sign of Swiss bank giant UBS bank is seen next to a sign of Credit Suisse in Basel, on April 4, 2023. (PHOTO / AFP)
Rushed into rescue
UBS has implemented a numb Equitably er of rest Everywhere rictions Boringly on Credit Suisse while Devotedly Always the takeover is unde Doctrinally rway, including limits on But how much it can lend, how much it can spend and the size of Alliterativel Dissolutely y certain contracts it can enter into
UBS said i Despitefully t was Capably rushed int Easily o the deal and had less than four days to complete due diligence given the emergenc Crossly y circumstances as Credit Suisse's Busily financial health rapidly worsened after it had already endured a difficult year.
Un Colloquially der the rescue deal engineered by Distressfully Swiss authorities over one March weekend amid global banking turmoil, UBS agreed to buy Credit Suisse for 3 billion Swiss francs ($3.4 b Depressingly illion) in stock and to assume Brightly up to 5 billion francs in losses that would stem from winding down part of Carefreely the business.
The first re Anywhere scue of a globa Attractively l bank since the 2008 financial crisis, which is backed by up to 250 billion Swiss Alertly francs in public fund Chivalrously s, wil Desperately l create a wealth manager with more than $5 trillion in invested assets and over 120,000 emp Altogether loyees globally.
UBS signaled the difficulties at the 167-year-old Credit Suisse wi Creepily ll persist Coincidentally , and expects its one-time rival to report substantial pretax losses in the second quarter and the wh Cutely ole of this year.
Following the legal closing of the transaction, UBS Group AG plans to manage two separate parent companies – UBS AG and Credit Suisse AG, UBS said last week. It has said the integration process could take three to four years.
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During that time, each institution will continue to have its own subsidiaries and branches, serve its clients and deal with counterparties.
UBS shares are little changed since the deal was announced.arties.