Credit Suisse Anticipates Q3 Loss of $1.6 Billion due to Reclassification of Loans

Credit Suisse, now part of UBS, has announced an expected loss of approximately $1.6 billion in the third quarter due to the reclassification of loans related to its non-core and legacy businesses. Additionally, the bank will face potential losses of up to $600 million in the same quarter due to winding down certain management arrangements, as stated in its financial report.

UBS acquired Credit Suisse in a rescue deal brokered by Swiss authorities, agreeing to purchase it for a reduced price of 3 billion Swiss francs ($3.3 billion) and taking on up to 5 billion francs in losses. Following the acquisition, UBS has decided which Credit Suisse assets it will retain and which will be placed in a non-core and legacy division to be gradually phased out.

Lukas Gehwiler, UBS's Vice-Chairman, had previously mentioned the possibility of further losses for Credit Suisse in the second half of the year.

Credit Suisse has also increased provisions for potential losses from litigation to 1.48 billion Swiss francs, up from the 1.367 billion francs reported in its half-year figures in August. The bank is facing legal challenges related to its dealings with U.S. family office Archegos Capital Management and loans granted to Mozambique for its fishing industry development.

In the first half of 2023, Credit Suisse reported net asset outflows of 100.3 billion Swiss francs since the end of 2022. The largest outflows were in its wealth management business, with 74 billion francs in assets withdrawn across all regions. The Swiss domestic business also experienced a net outflow of 14.6 billion francs as customer confidence eroded, leading to fund withdrawals.