UBS subsidiary Credit Suisse is reported to have recorded around $4 billion in losses for the second quarter. All eyes are now on Thursday when UBS reports its results.
Numerous media outlets have picked up on a report by a Swiss newspaper that Credit Suisse will report a loss of 3.5 billion Swiss francs ($4 billion) in the second quarter, when UBS reports its results on August 31, increasingly being referred to as «D-Day.»
The article appeared in the «Sonntagszeitung» (In German, behind paywall), citing sources familiar with the matter.
With the results, UBS is expected to give an update on the status of Credit Suisse, which it took over in March in a forced action by the Swiss government and authorities. One of the more contentious aspects of the deal was the 16 billion francs ($18 billion) writedown of Credit Suisse's AT1 bonds on the order of the Swiss Financial Market Supervisory Authority (Finma).
Even with such a loss by Credit Suisse, UBS could see a profit of nearly $35 billion in the second quarter because of an accounting provision. Acquired at a bargain price, Credit Suisse ended up with negative goodwill on its books, which can lead to write-ups when the bank's value recovers, and a one-time gain that exists on the ledger.
AT1 Writedown Helps First Quarter Results
By writing off the securities, Credit Suisse posted net income attributable to shareholders of 12.4 billion Swiss francs ($13.9 billion) in the first quarter. Pre-tax income was further impacted by a 700 million franc gain from the sale of the Securitized Products Group, a goodwill impairment of 1.3 billion francs, the bulk of which was in wealth management.
