| 3 December 2023, Sunday |

Credit Suisse faced bank run, depositors withdrew $68 billion ahead of UBS takeover

A Reuters report said on Monday, that Credit Suisse, one of the leading banks in Switzerland, faced a significant bank run ahead of its collapse in March 2023.

The Swiss bank announced that it experienced a significant outflow of assets totaling 61 billion Swiss francs ($68 billion) in the first three months of 2023. Reuters reported that customer deposits fell by 67 billion Swiss francs in the quarter, with the bank’s wealth management division responsible for most outflows across regions.

A bank run takes place when a large number of customers of a bank withdraw their deposits at the same time over fears about the bank’s solvency.

Depositors began withdrawing their funds from the scandal-plagued Credit Suisse after it became entangled in the market upheaval caused by the failures of US lenders Silicon Valley Bank and Signature Bank. As a result, Swiss authorities scrambled to create a rescue package in which UBS agreed to buy Credit Suisse for 3 billion Swiss francs in equity and accept up to 5 billion Swiss francs in damages. It also included state financial guarantees worth 200 billion francs.

A Tricky Position

Despite a major bank run, the Swiss banking giant also reported a net profit of 12.8 billion Swiss francs ($14 billion) for the first quarter ending March 2023. This was a notable increase compared to the significant loss incurred in the same period last year. The bank attributed the positive net profit mainly to the emergency takeover deal that wiped out high-risk debtors.

The significant asset outflows along with a rise in net profit was met with mixed reactions in the market. While the increase in net profit was viewed positively, the persistent outflows of assets raised concerns about the bank’s ability to overcome its challenges.

Meanwhile, Credit Suisse’s ability to generate revenue appeared to be impaired. London-based KBW analyst Thomas Hallett told Reuters that the “rescue deal could well remain a drag on UBS operating results unless a deeper restructuring plan is announced.”

Credit Suisse also cancelled the planned $175 million acquisition of Michael Klein’s investment banking business, which it had planned to spin alongside its own investment banking division.

According to RBC Capital Markets analysts, the results show the difficult work ahead for UBS in acquiring its rival. UBS is yet to announce how many Credit Suisse jobs will be cut. Following the takeover, UBS executives stated that the deal will result in $8 billion in cost savings by 2027, $6 billion of which will come from reducing the number of full-time employees.

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