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Monday, April 15, 2024

Before the rescue, Credit Suisse faced £55bn in withdrawals

Credit Suisse, a Swiss banking giant, has reported that 61.2 billion Swiss francs, which equates to £55.2 billion or $68.6 billion, left the bank in the first quarter of 2023. This announcement was made alongside what is expected to be the bank’s final-ever financial results, as Credit Suisse is soon to be sold to Swiss rival UBS. The bank’s wealth management division, which is its flagship sector, saw a drop in the number of assets it managed to 502.5 billion francs by the end of March. This is almost 29% lower than the same period last year, according to Credit Suisse. The bank said that these outflows had not yet reversed as of 24th April 2023, although they had moderated.

Clients began withdrawing their money from Credit Suisse after the bank became embroiled in the market turbulence that followed the collapses of Silicon Valley Bank and Signature Bank in the United States in March. Swiss authorities put together a rescue package for Credit Suisse, including more than 200 billion francs of financial guarantees, and arranged for UBS to take over Credit Suisse. Credit Suisse has been loss-making and has faced a series of issues in recent years, including money laundering charges. The bank reported a loss of 7.3 billion Swiss francs in 2022, its worst year since the financial crisis of 2008, and had warned that it did not expect to be profitable until 2024.

Independent banking analyst Frances Coppola commented on the latest results, saying that Credit Suisse had seen billions withdrawn in the final three months of 2022, and the first quarter of 2023’s withdrawals came on top of that. She added that banks do not survive outflows like that, regardless of how large they are. Shanti Kelemen, chief investment officer at M&G Wealth Investments, said that given the bank’s size, the outflows were always going to be a significant number. She added that the latest announcement confirmed what UBS had bought.

The collapses of Silicon Valley Bank and Signature Bank in the US were caused by a sharp drop in the value of the assets they held due to rising interest rates. This led to banking shares around the world falling sharply and investors rushing to withdraw their money from Credit Suisse, which was already struggling. Although concerns about other banks have eased since then, Coppola said that others could still face difficulties. Swiss prosecutors have opened an investigation into the sudden takeover of Credit Suisse, which was the country’s second-largest bank. The deal has angered taxpayers and shareholders of both banks, who were not given a vote on the takeover. Some have also argued that it has damaged Switzerland’s global reputation as a financial centre. The deal, when it was announced, valued Credit Suisse at $3.15bn (£2.6bn), whereas on the Friday before the settlement was reached, it had been valued at approximately $8bn.

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