Clients pulled billions of assets from Credit Suisse in the first quarter. Due in large part to the write-down of AT1 bonds, it reversed the trend of quarterly losses of net income attributable to shareholders.
Due to the forced write-down of its AT1 bonds by Finma, Credit Suisse posted net income attributable to shareholders of 12.4 billion Swiss francs ($13.9 billion), according to first quarter results released Monday, three days earlier than initially planned. Accounting for that and other factors, it booked a pre-tax loss of 1.3 billion francs.
Pre-tax income was further impacted by a 700 million franc gain from the sale of the Securitized Products Group, a goodwill impairment of 1.3 billion francs, the bulk of which was in wealth management.
Credit Suisse had planned to publish its quarterly figures next Thursday, but moved them up to Monday at short notice. Presentations for media, analysts, and investors will no longer be held by the money house after the emergency bailout by Swiss rival UBS.
Clients Take Out Billions
Credit Suisse reported it suffered a further 61.2 billion francs in client fund outflows in the first quarter, coming on top of the 110.5 billion francs clients took out in the fourth quarter. Outflows in the wealth management division in the first quarter of 47.1 billion francs marked a nine percent decline from the AuM level at the end of last year. In the Swiss bank, the outflows were more modest, with a one percent decrease, amounting to 6.9 billion francs. A drop of 11.6 billion francs in the asset management unit.
During the second half of March, the bank experienced significant cash deposit withdrawals and non-renewal of maturing time deposits. Customer deposits declined by 67 billion francs in the first quarter. These outflows were most acute in the days immediately preceding and following the announcement of the merger, and although stabilized at much lower levels, had not yet reversed as of April 24.
Goodwill Impairment
Overall assets under management fell to 1.253 trillion from 1.294 trillion francs at the end of last year.
A review of the Group's financial plans of deposit and AuM outflows in the first quarter concluded the estimated fair value of the wealth management unit was below its carrying value which resulted in the 1.3 billion franc goodwill impairment, resulting in a goodwill balance of zero.
Merger Effects
With the merger with UBS, the adverse revenue impact from the previously disclosed exit from non-core businesses and exposures, restructuring charges, and funding costs, Credit Suisse expects the investment bank and the Group to report a substantial loss before taxes in the second quarter and the full year.
Actual results depend on several factors, including the performance of the investment bank and wealth management divisions, deposit and net asset flows, the continued exit of non-core positions, goodwill, software, and other impairments. In addition, there are litigation, regulatory actions, credit spreads, and related funding costs, the usage and availability of the Swiss National Bank's liquidity facilities, and the impact of continued voluntary and involuntary employee attrition, it said.
UBS will disclose its figures on Tuesday and provide information on its business performance, with the report being gleaned for clues on the integration process with Credit Suisse.
More to follow
