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Credit Suisse has warned it expects to lose at least $2.2 billion in the third quarter as UBS consolidates operations bailed out six months ago and looks to wind down the bank’s Apollo deal Investment Contract.
Credit Suisse said in its first-half financial report released on Friday that it would suffer a loss of about $1.6 billion as it exits loans from the non-core and legacy divisions of the combined group’s “bad bank.”
Credit Suisse will operate as a subsidiary of UBS until the businesses are legally combined next year. Credit Suisse said it would also report a loss of up to $600 million in the third quarter due to its decision to cancel “certain management arrangements.”
A person familiar with the matter said that this is related to the sale of its securitization products unit to Apollo last year, and UBS intends to terminate the related investment management contract signed by Credit Suisse and the US alternative asset management company.
UBS believes it will not make the best use of the agreement, so it wants to terminate the relationship, which will incur additional costs, the person added.
The bank’s state-orchestrated takeover of its long-time rival, completed in June, is the most significant bank merger since the global financial crisis.
UBS reported a second-quarter profit of $29 billion, a record for the banking industry, driven almost entirely by accounting gains from the Credit Suisse acquisition.
UBS shares have risen more than 30% since agreeing to acquire Credit Suisse, hitting a 15-year high.
At the end of August, UBS said it aimed to complete most of Credit Suisse’s integration by the end of 2026 and would retain the bank’s domestic operations.
It also announced the creation of a non-core and legacy unit, which will include parts of Credit Suisse’s business that are incompatible with UBS’s strategies and policies.
“The measures announced will have an impact on Credit Suisse’s divisions and may result in further impairments and write-downs, including those related to goodwill, software and real estate, certain impairment losses related to the portfolio held for sale. Fair value adjustments as well as tax Credit Suisse said in its half-year report on Friday.
UBS will announce third-quarter results on November 7, but Vontobel analyst Andreas Venditti said losses on Credit Suisse loans would not affect results because they have already been taken into account.
Chief Executive Sergio Ermotti said last week that he would unveil the bank’s three-year strategy in February.
Credit Suisse said in its semi-annual report that its full-time headcount fell to 33,968 at the end of June from 38,908 at the beginning of the year, although this does not include back-office departments that have been relocated. Becomes an independent subsidiary of UBS Group AG.
Credit Suisse said in its annual report at the start of the year that it employed 50,480 full-time employees.
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