© Reuters. FILE PHOTO: A emblem of Swiss financial institution UBS is seen in Zurich, Switzerland March 29, 2023. REUTERS/Denis Balibouse
(Reuters) -UBS Group AG expects a monetary hit of about $17 billion from the takeover of Credit score Suisse Group AG, the financial institution mentioned in a presentation early on Wednesday because it prepares to finish the rescue of its struggling Swiss rival.
UBS estimates a destructive impression of $13 billion from truthful worth changes of the mixed group’s belongings and liabilities. UBS additionally sees $4 billion in potential litigation and regulatory prices stemming from outflows, the financial institution mentioned.
UBS, nevertheless, additionally estimated it will e-book a one-off acquire stemming from the so-called “destructive goodwill” of $34.8 billion by shopping for Credit score Suisse for a fraction of its e-book worth.
The monetary cushion will assist take up potential losses and will end in a lift to the lender’s second-quarter revenue if UBS closes the transaction subsequent month as deliberate.
UBS mentioned the estimates have been preliminary and the numbers may change materially in a while.
The financial institution additionally mentioned it’d e-book restructuring provisions after that, however provided no numbers.
Analysts at Jefferies had estimated restructuring prices, litigation provisions and the deliberate winding down of the non-core unit may whole $28 billion.
In the meantime, UBS has carried out numerous restrictions on Credit score Suisse whereas the takeover is underway.
In sure circumstances, Credit score Suisse can’t grant a brand new credit score facility or credit score line exceeding 100 million Swiss francs ($113 million) to funding grade debtors or greater than 50 million francs to non-investment grade debtors, a UBS submitting confirmed.
Credit score Suisse additionally can’t undertake capital expenditure of greater than 10 million francs or enter into sure contracts price greater than 3 million francs per 12 months.
The submitting reveals Credit score Suisse can’t order any “materials amendments” to its worker phrases and situations, together with remuneration and pension entitlements, until deal closure.
UBS agreed in March to purchase Credit score Suisse for 3 billion Swiss francs ($3.4 billion) in inventory and to imagine as much as 5 billion francs in losses that might stem from winding down a part of the enterprise, in a shotgun merger engineered by Swiss authorities over a weekend amid a worldwide banking turmoil.
The deal, the primary rescue of a worldwide financial institution because the 2008 monetary disaster, will create a wealth supervisor with greater than $5 trillion in invested belongings and over 120,000 staff globally.
The Swiss state is backing the take care of as much as 250 billion Swiss francs in public funds.
Switzerland’s authorities is offering a assure of as much as 9 billion francs for additional potential losses on a clearly outlined a part of Credit score Suisse portfolio.
UBS signaled no fast turnaround for the 167-year-old Credit score Suisse, which got here to the brink of collapse in the course of the latest banking sector turmoil after years of scandals and losses.
It mentioned it anticipated each the Credit score Suisse group and its funding financial institution to report substantial pre-tax losses within the second quarter and the entire of this 12 months.
Following the authorized closing of the transaction, UBS Group AG (SIX:) plans to handle two separate mum or dad corporations – UBS AG and Credit score Suisse AG, UBS mentioned final week. It has mentioned the mixing course of may take three to 4 years.
Throughout that point, every establishment will proceed to have its personal subsidiaries and branches, serve its purchasers and take care of counterparties.
