Swiss authorities brokered UBS’s controversial Credit Suisse emergency rescue for 3 billion Swiss francs ($3.37 billion) over the course of a March weekend.
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UBS estimated financial losses of about $17 billion from the emergency takeover Credit Suisseaccording to a regulatory filing, and said the hasty deal may have affected its due diligence process.
In a new filing with the U.S. Securities and Exchange Commission (SEC) on Tuesday night, the Swiss banking giant flagged a total negative impact of about $13 billion in price corrections. fair value of the new combined entity’s assets and liabilities, along with the potential $4 billion in litigation and legal costs.
However, UBS is also expected to offset this by placing a one-time profit of $34.8 billion from so-called “negative goodwill,” which refers to the acquisition of assets at a low cost. costs are much lower than their actual value.
The Bank emergency acquisition of struggling domestic rival for 3 billion Swiss francs ($3.4 billion) was brokered by Swiss authorities over a weekend in March, with Credit Suisse teetering on the brink of collapse amid massive customer withdrawals and plunging stock prices.
In its revised F-4 filing, UBS also emphasized that the short time frame in which UBS was required to conduct due diligence may have affected Credit Suisse’s ability to “adequately assess Credit Suisse’s assets and liabilities” before when taking over.
Swiss government agencies approached UBS on March 15 while considering whether to start selling Credit Suisse to “soothe markets and avoid the possibility of contagion in the financial system”, the filing said. profile disclosure. The bank has until March 19 to conduct due diligence and make a decision.
“If the circumstances of the due diligence process affect UBS Group AG’s ability to scrutinize Credit Suisse’s debts and weaknesses, it is possible that UBS Group AG will agree to a difficult rescue,” UBS said. significantly more difficult and risky than they had anticipated.” in the Risk Factors section of the profile.
While this is highlighted as a potential risk, UBS CEO Sergio Ermotti told CNBC last month that the Credit Suisse deal is risk-free and will generate long-term benefits.
The most controversial aspect of the deal was the decision by the regulator FINMA to clear the surrounding $17 billion in additional Credit Suisse tier 1 (AT1) bonds prior to the shares, defying the usual order of write-down and leading to legal action from AT1 bondholders.
Tuesday’s filing shows that UBS’s Strategy Committee began a review of Credit Suisse in October 2022 as its rival’s financial position worsened. The long troubled lender experienced large net asset outflows at the end of 2022 due to liquidity concerns.
UBS’s Strategy Committee concluded in February that acquiring Credit Suisse was “undesirable” and the bank continued to conduct an analysis of the financial and legal implications of such an arrangement in the event of The situation deteriorated to the point that the Swiss authorities would ask UBS to step in.
UBS announced last week that Credit Suisse CEO Ulrich Koerner will join the executive board of the new incorporated entity once the agreement is legally closed, which is expected within the next few weeks.
The group will act as an “integrated banking group” with Credit Suisse maintaining its brand independence for the foreseeable future, as UBS pursues a phased integration process.
