UBS flags $17 billion hit from Credit Suisse takeover

Published

1 year ago

May 17, 2023

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UBS Group AG expects a financial hit of about $17 billion from the takeover of Credit Suisse Group AG, the bank said in a regulatory presentation as it prepares to complete the rescue of its struggling Swiss rival.

UBS estimates a negative impact of $13 billion from fair value adjustments of the combined group’s assets and liabilities.

It also sees $4 billion in potential litigation and regulatory costs stemming from outflows.

UBS, however, also estimated it would book a one-off gain stemming from the so-called “negative goodwill” of $34.8 billion by buying Credit Suisse for a fraction of its book value.

The financial cushion will help absorb potential losses and could result in a boost to the lender’s second-quarter profit if UBS closes the transaction next month as planned.

UBS said the estimates were preliminary and the numbers could change materially later on.

It also said it might book restructuring provisions after that, but offered no numbers. Union Bank of Switzerland said it estimates a negative impact of $13 billion from fair value adjustments of the combined group’s assets and liabilities. AFP via Getty Images

“The financial information lacks an estimate of restructuring provisions as these will be booked after the transaction closes,” Vontobel analyst Andreas Venditti said in a note.

Analysts at Jefferies have estimated restructuring costs, litigation provisions and the planned winding down of the non-core unit could total $28 billion.

Meanwhile, UBS has implemented a number of restrictions on Credit Suisse while the takeover is underway.

In certain cases, Credit Suisse cannot grant a new credit facility or credit line exceeding $113 million to investment-grade borrowers or more than 50 million francs to non-investment-grade borrowers, a UBS filing showed. Union Bank of Switzerland implemented a number of restrictions on Credit Suisse while the takeover is underway.Getty Images

“Credit Suisse obviously found itself in a problem because of lapses in its risk controls and I think just setting these parameters on the ability or standards to lend out is not very unreasonable,” said Benjamin Quinlan, Hong Kong-based chief executive of financial consultancy firm Quinlan & Associates

“Ultimately, from UBS’ perspective, they will have to wear these risks on their books.”

Credit Suisse also cannot undertake capital expenses of more than 10 million francs as part of the restrictions or enter into certain contracts worth more than 3 million francs per year.

The filing shows Credit Suisse cannot order any “material amendments” to its employee terms and conditions, including remuneration and pension entitlements, till deal closure.

The restrictions “will cause certain clients to leave Credit Suisse” but may not accelerate the pace of outflows already seen, said Quinlan, following UBS’ statement last week that Credit Suisse had already stemmed asset outflows. RUSHED INTO DEAL

UBS said it was rushed into the deal and had less than four days to complete due diligence given the ’emergency circumstances’ as Credit Suisse’s financial health worsened. The filing shows Credit Suisse cannot order any “material amendments” to its employee terms and conditions. AFP via Getty Images

UBS agreed in March to buy Credit Suisse for $3.4 billion in stock and to assume up to 5 billion francs in losses that would stem from winding down part of the business, in a shotgun merger engineered by Swiss authorities over a weekend amid a global banking turmoil. Start your day with all you need to know

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The deal, the first rescue of a global bank since the 2008 financial crisis, will create a wealth manager with more than $5 trillion in invested assets and over 120,000 employees globally.

The Swiss state is backing the deal with up to 250 billion Swiss francs in public funds.

Switzerland’s government is providing a guarantee of up to 9 billion francs for further potential losses on a clearly defined part of Credit Suisse portfolio.

UBS signaled no quick turnaround for the 167-year-old Credit Suisse, which came to the brink of collapse during the recent banking sector turmoil after years of scandals and losses.

It said it expected both the Credit Suisse group and its investment bank to report substantial pre-tax losses in the second quarter and the whole of this year.

Following the legal closing of the transaction, UBS Group AG plans to manage two separate parent companies UBS AG and Credit Suisse AG, UBS said last week.

It has said the integration process could take three to four years.

During that time, each institution will continue to have its own subsidiaries and branches, serve its clients and deal with counter-parties.

Sports

Sources: Nats demote All-Star after all-nighter

Published

2 hours ago

September 21, 2024

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Sources: Nats demote All-Star after all-nighter

Jeff Passan, ESPNSep 21, 2024, 01:47 PM ET
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The Washington Nationals demoted All-Star shortstop CJ Abrams to the minor leagues after he stayed out all night at a Chicago-area casino, leaving only hours before a Friday day game against the Chicago Cubs, sources told ESPN’s Jesse Rogers.

The 23-year-old Abrams led off for the Nationals and went 0 for 3 with a walk and strikeout in Friday’s game, which started at 1 p.m. CT. He was informed of the demotion Friday night, sources said. He will be sent to West Palm Beach, home of the Nationals’ minor league complex.

Because Abrams has been with Washington for the entirety of the season, the demotion will not affect his service time. Players earn a full year of service with 172 days on the major league roster, and Abrams already has exceeded that threshold.

Abrams could, however, file a grievance through the Major League Baseball Players Association to fight for lost pay if he believes the demotion unjust. He would lose around $30,000 of his $752,000 salary for missing the season’s final week. Abrams will be arbitration-eligible this winter, entering the system for the first of four times as a Super 2.

Acquired as one of the centerpieces of the Juan Soto trade two years ago, Abrams parlayed a breakout first-half into an All-Star selection, hitting .268/.343/.489 with 15 home runs and 15 stolen bases over the Nationals’ first 89 games. He struggled significantly in the second half, slashing .203/.260/.326, and Abrams’ defense has been a weakness throughout the season.

Still, the Nationals did not intend to send him to the minor leagues until they learned of his time spent at the casino, which was first reported Friday by CHGO.

“I just want it to be known it wasn’t performance-based,” Nationals manager Dave Martinez told reporters Saturday. “It’s an internal issue. I’m not going to give specifics.”

World

At least 44 people killed in Israel strikes on Lebanon and Gaza in last 24 hours

Published

2 hours ago

September 21, 2024

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At least 44 people killed in Israel strikes on Lebanon and Gaza in last 24 hours

At least 44 people have been killed in Israeli strikes on Lebanon and Gaza in the last 24 hours.

A strike on the Lebanese capital Beirut killed at least 31 people including three children and seven women, the country’s health minister Firas Abiad said.

Fifteen of the 68 wounded in the attack remain in hospital.

Ali Harake, the head of the rescue team searching through the rubble, told Sky News his team is still looking for between 17 and 18 missing people – though he fears none have survived.

Follow the latest updates on the Middle East

It is understood two apartment blocks in a densely populated southern neighbourhood collapsed in the strike – the deadliest attack on Beirut in decades.

Top Hezbollah commanders are believed to have been meeting in the basement of one of the buildings.

Hezbollah has confirmed two of its senior commanders, Ibrahim Aqil and Ahmed Wahbi, died in the strike while an Israeli military spokesperson said that at least 16 Hezbollah militants were killed.

Wahbi oversaw the military operations of the Radwan special forces – a commando unit that seeks to infiltrate and carry out attacks in Israel – until early 2024. Aqil was also a top commander for the Iran-backed group.

The Palestinian militant group Hamas has described the killing of Aqil as a “crime” and a “folly”, adding Israel will “pay the price”.

Meanwhile, at least 13 people have been killed in Israeli strikes on Gaza City, according to a local report.

The strikes are believed to have hit several schools sheltering displaced people in the southern part of the city.

The strikes come after Hezbollah launched one of its most intense bombardments of northern Israel in nearly a year of fighting, largely targeting Israeli military sites.

Israel’s Iron Dome missile defence system intercepted most of the Katyusha rockets.

Hezbollah said its latest wave of rocket attacks was a response to past Israeli strikes on southern Lebanon.

It came days after mass explosions of Hezbollah pagers and walkie-talkies killed at least 37 people, including two children. Some 2,900 others were wounded in the assault which has been widely attributed to Israel.

World

Fire rips through arms depot deep inside Russia after huge Ukrainian drone attack – as Zelenskyy prepares to meet Trump

Published

2 hours ago

September 21, 2024

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Fire rips through arms depot deep inside Russia after huge Ukrainian drone attack - as Zelenskyy prepares to meet Trump

A fire has ripped through a Russian missile depot in the Tver region deep inside the country after it was targeted in a Ukrainian drone attack, the defence ministry in Moscow has said.

Footage shows a second Ukrainian drone attack on the southwestern Russian region of Krasnodar also triggered a fire and caused a series of explosions.

Russia’s defence ministry has claimed its forces shot down 101 Ukrainian drones over Russian territory and occupied Crimea during the overnight attacks.

The drone strikes were carried out as Ukrainian leader Volodymyr Zelenskky said he is hoping to meet Donald Trump next week when he travels to the US – where he will present US President Joe Biden with a “victory plan” in relation to the war.

Meanwhile, Ukraine’s foreign minister said Russia appears to be planning strikes on Ukrainian nuclear facilities before the winter.

Posts on local Telegram channels said a Ukrainian drone attack struck an arms depot near the town of Toropets, in Russia’s Tver region – which is about 380 kilometres (240 miles) northwest of Moscow and about 500 kilometres (300 miles) from the Ukrainian border on Saturday.

Russian authorities closed a 100-kilometre (62-mile) stretch of a highway and evacuated passengers from a nearby rail station.

The depot appeared to be just miles from a Russian weapons arsenal storing missiles, bombs and ammunition in Tver that was struck by Ukrainian drones early Wednesday, injuring 13 people and also causing a huge fire.

Meanwhile, at least 1,200 people were evacuated from Russia’s southwestern Krasnodar region after an ammunition depot and missile arsenal were struck in the second drone attack overnight, the local governor has said.

Most of those evacuated were staying with friends and relatives, Veniamin Kondratyev, the governor of Krasnodar region, said on the Telegram messaging app.

There were no immediate reports of casualties in either Tver or Krasnodar.

Ukraine warning of attacks on nuclear sites

It comes as Kyiv is urging the International Atomic Energy Agency (IAEA) and Ukraine’s allies to establish permanent monitoring missions at the country’s nuclear plants as it warns they could be targeted in Russian attacks.

“In particular, it concerns open distribution devices at (nuclear power plants and) transmission substations, critical for the safe operation of nuclear energy,” foreign minister Andriy Sybiha wrote on X.

Zelenskyy prepares for US trip

Meanwhile, the Ukrainian leader has said he plans to meet Republican presidential candidate Mr Trump on either Thursday or Friday next week.

During the trip, Mr Zelenskyy will present Mr Biden with a so-called victory plan as he hopes to bring about an end to the conflict.

The Ukrainian president has said the plan will include long-range striking capabilities and other weapons long sought by Kyiv, and will serve as the basis for any future negotiation with Russia.

He is also expected to push Washington to lift restrictions on long-range missile strikes inside Russia.

Mr Zelenskyy will attend sessions of the UN Security Council and General Assembly and also plans to meet vice president Kamala Harris, the Democratic candidate in this year’s US election, in separate meetings on 26 September.

The developments come as three sources have told Reuters that Iran did not include mobile launchers with the close-range ballistic missiles that Washington has accused Tehran of delivering to Russia for use against Ukraine.

The sources – a European diplomat, a European intelligence official and a US official – said it was not clear why Iran did not supply launchers with the Fath-360 missiles, raising questions about when and if the weapons will be operational.