Credit Suisse has warned that it may face a £1.8bn ($2.2bn) loss in the third quarter as it attempts to deal with legacy loans and problematic parts of its business.
The scandal-hit Swiss bank, which was taken over by UBS in March, said in a financial report that it expects to face a loss of around $1.6bn from exiting loans held in the non-core and legacy division which UBS established in August.
The non-core division contains Credit Suisse’s businesses which are “not aligned with UBS’s strategy and policies”. This mainly includes assets and liabilities related to its investment bank.
Credit Suisse also confirmed it has also decided to wind down “certain management arrangements” which it said could result in a loss of up to $600m in the third quarter.
UBS estimates that about half of the $55bn of risk-weighted assets included in the non-core division will run off by the end of 2026. It intends to “actively reduce” these assets in order to “reduce operating costs and financial resource consumption”.
The report also showed that Credit Suisse’s workforce had dropped by 13 per cent over the past year, with the total headcount falling to 33,968 from just under 39,000 in June 2022.
Credit Suisse was taken over by UBS in a state-brokered deal back earlier this year. Years of scandal had taken their toll on the bank, which saw mass clients outflows and a consistent share price decline.
It was the first merger between major banks since the financial crisis and is expected to be an extremely costly and difficult integration.
In its half year results at the end of August, UBS confirmed that it would keep Credit Suisse’s domestic business. The two banks will legally merge next year.
UBS aims to substantially complete the integration of Credit Suisse by the end of 2026.