UBS is in line to make an almost $35bn (£28bn) gain after its emergency takeover of Credit Suisse – but has said it will take a $17bn hit from costs related to the rushed rescue deal.
The Swiss lender has said it will make gains of $34.8bn after taking on Credit Suisse, based on an initial assessment of data until the end of last year, according to a regulatory filing. The accounting gain will be one of the biggest ever reported by a bank in a single quarter.
However, UBS is also estimating it could rack up almost $4bn in costs related to litigation, regulatory matters and other liabilities after the takeover of its smaller rival.
UBS is also expecting to take a $13bn hit from asset and liability adjustments in the group, meaning the takeover will cost it $17bn, and the regulatory filing said Credit Suisse faces a number of restrictions around its business until the $3.4bn deal completes.
A group of Credit Suisse investors who lost bonds worth more than CHF4.5bn (£4bn) are already suing Switzerland’s financial regulator over its decision to wipe out risky bank debt as part of the government-brokered takeover deal in March.
“The extent to which UBS was a reluctant partner in the deal to buy Credit Suisse has become clear,” said Susannah Streeter, the head of money and markets at Hargreaves Lansdown.
“The Swiss bank has had to absorb a painful loss after being rushed into taking over its beleaguered rival. It is a heavy cost to bear, and has been partly put down to the lack of time it was able to complete due diligence and assess the web of problems at Credit Suisse.”
Unlike a standard deal, where parties have months to do due diligence, the Credit Suisse deal was hammered out in 48 hours with UBS executives pointing out the risks they are taking integrating the business.
Shares in UBS, which have been under pressure since the deal to avoid Credit Suisse facing bankruptcy, were flat in early trading in Zurich on Wednesday.
Last month, worried UBS investors urged the Swiss lender to avoid sweeping job cuts and inflating executive pay as they raised concerns about the creation of a mega-bank after the emergency takeover.
