Credit Suisse, now a part of UBS, anticipates a third-quarter loss of about $1.6 billion stemming from the reclassification of loans associated with its non-core and legacy businesses, as declared on Friday. Additionally, the bank may incur a loss of up to $600 million due to the winding down of certain management arrangements in the same quarter.
Earlier this month, UBS’s Vice-Chairman Lukas Gehwiler suggested that Credit Suisse might face further losses in the latter half of the year. This followed UBS’s decision on which Credit Suisse assets it would retain and which would be placed in a non-core and legacy division for gradual wind-down.
UBS acquired Credit Suisse on March 19 for a significantly reduced price of CHF 3 billion, assuming up to CHF 5 billion in losses. This rescue was orchestrated by Swiss authorities as Switzerland’s second-largest bank teetered on the brink of collapse.
In its financial report for the first six months of 2023, Credit Suisse reported net asset outflows of CHF 100.3 billion ($109.83 billion) since the end of 2022. The wealth management business experienced the most significant outflow with CHF 74 billion in assets withdrawn across all regions. Confidence in the bank collapsed, leading to panicked customers withdrawing funds and causing the Swiss domestic business to suffer a net outflow of CHF 14.6 billion.
Despite the challenges faced, UBS has demonstrated resilience. The company has been aggressively buying back shares and has maintained dividend payments for 12 consecutive years. This is a testament to the company’s commitment to its shareholders and its confidence in its future prospects. The company also stands as a prominent player in the Capital Markets industry with a market capitalization of $80,670.41M.
The real-time metrics also reveal that UBS is trading at a low earnings multiple with a P/E ratio of just 2.33. This, coupled with a high return over the last year and a strong return over the last three months, makes UBS an attractive proposition for investors.
However, it’s important to note that UBS’s revenue has been declining at an accelerating rate. The company’s revenue growth for Q2 2023 was -7.07%, and its gross profit for the same period stood at $33.65B. This, along with the prediction that the company’s net income is expected to drop this year, suggests that UBS may face some financial headwinds in the near future.
