According to recent reports, the US banking crisis triggered a massive outflow of $68 billion from the failed Swiss financial giant Credit Suisse. The bank revealed to Reuters that in Q1 of this year alone, over 61 billion francs (equivalent to $68 billion) in assets left the bank, and this figure is still growing. Despite the outflows moderating, as of April 24, 2023, they have yet to reverse.
As a result of its deteriorating financial situation, Credit Suisse is currently being taken over by UBS, one of its old rivals, in a deal that was only made possible with the support of the Swiss federal government, Swiss Financial Market Supervisory Authority FINMA, and Swiss National Bank. UBS was offered an 8 billion euro ($8.6 billion) insurance scheme to protect it from potential losses, and the Swiss government even changed laws to allow the deal to go through without a shareholder vote.
However, the analyst at investment bank KBW, Thomas Hallet, suggests that the takeover may end up being a net negative on UBS, as Credit Suisse’s ability to generate revenue was so bad. He believes that a “deeper restructuring plan” is necessary to make the deal worthwhile for UBS.
Credit Suisse’s woes began when depositors started withdrawing their funds after the bank was exposed to Silicon Valley Bank and Signature Bank. As a result, the bank’s shares have taken a significant hit, currently trading at $0.91, down 98.7% from its all-time high of $74 in 2007. The bank’s Q1 earnings report is expected to be its last, as its 127-year-old business is on the brink of collapse.
In conclusion, the US banking system’s stress has triggered the collapse of Credit Suisse, resulting in a significant outflow of $68 billion. The bank’s financial situation has been so dire that it is being taken over by UBS with the Swiss government’s support. Nevertheless, experts warn that the deal may not be enough to turn Credit Suisse’s fortunes around. With the bank’s shares trading at a fraction of their all-time high and Q1 earnings report expected to be its last, Credit Suisse’s future looks bleak.