Billionaire flight of resources almost broke Credit Suisse – 04/24/2023 – Market

Credit Suisse has revealed the scale of the outflow of customer assets that led to the Swiss government-backed rescue of the bank in March.

The financial institution reported that 61.2 billion Swiss francs (approximately R$ 345 billion) were withdrawn from the bank in the first three months of the year.

The amount was disclosed in what may become the institution’s last financial statement.

Its forced sale to competing Swiss bank UBS is expected to close soon.

In the wealth management division of Credit Suisse, the value of managed assets fell to 502.5 billion Swiss francs at the end of March, an amount almost 29% lower than that recorded in the same period last year, the bank said in a statement.

“These outflows have moderated but have not yet reversed as of April 24, 2023,” he added.

Customers began pulling money out of the bank after it was hit by the market turmoil that followed the collapse of Silicon Valley Bank and Signature Bank in the US in March.

In Switzerland, authorities have prepared a rescue plan for Credit Suisse. It included more than 200 billion francs in financial guarantees and provided for UBS to agree to take over.

The bank was loss-making and faced a series of problems in recent years, including allegations of money laundering.

Credit Suisse posted a loss of 7.3 billion Swiss francs in 2022 – its worst year since the 2008 financial crisis – and had warned it did not expect a profit until 2024.

Commenting on the institution’s latest financial statement, Frances Coppola, an independent banking analyst, told the BBC’s Today program that billions had also been withdrawn in the last three months of 2022.

“So it’s clear that the [retiradas] this quarter added to that. Banks don’t survive capital outflows like that, they really don’t, no matter how large.”

Shanti Kelemen, chief investment officer at M&G Wealth Investments, said that due to the bank’s size, exits “would be a big number”.

“If we confirmed anything today, that’s what UBS bought.”

The failures of Silicon Valley Bank and Signature Bank in the US came after the value of the assets they held dropped dramatically as a result of rising interest rates.

Shares in banks around the world fell sharply on concerns that other creditors could face similar problems, and investors rushed to withdraw their money from the already troubled Credit Suisse.

Since then, concerns about other banks have eased, but Coppola says they could still struggle.

“I think we’re going to see more banking turmoil. Whether it’s going to affect big banks like this one, I don’t know.”

The Swiss public prosecutor has opened an investigation into the sudden acquisition of Credit Suisse, which was the country’s second largest bank, by UBS.

The deal angered taxpayers and shareholders of both banks, who were barred from voting on the takeover. Some also argued that it harmed Switzerland’s global reputation as a financial center.

When the deal was announced, Credit Suisse was valued at US$3.15 billion (R$15.9 billion), while on the Friday before the deal was closed, it had been valued at around US$8 billion ( BRL 40.4 billion).

This text was published here.