Business Context and Reporting Period
This Form 6-K filing, dated August 31, 2023, presents preliminary unaudited financial results for Credit Suisse AG for the second quarter ended June 30, 2023. Credit Suisse AG is now a subsidiary of UBS Group AG following the acquisition completed on June 12, 2023. The results reflect significant impacts from the acquisition, including fair value adjustments, impairments, and integration costs, alongside a slowdown in business volumes and client activity.
Key Financial Metrics
| Metric | 2Q23 (CHF) | 1Q23 (CHF) | 2Q22 (CHF) |
|---|---|---|---|
| Net Revenues | (528) million | 17,630 million | 3,687 million |
| Adjusted Net Revenues | 1,750 million | 2,790 million | 3,862 million |
| Income/(Loss) Before Taxes | (8,874) million | 11,813 million | (1,251) million |
| Adjusted Loss Before Taxes | (2,085) million | (1,416) million | (525) million |
| Net Income/(Loss) | (9,329) million | 11,503 million | (1,645) million |
| Total Assets | 483,735 million | 538,568 million | 730,295 million |
| CET1 Capital | 45,542 million | 54,244 million | 42,443 million |
| CET1 Ratio | 21.0% | 22.4% | 15.5% |
| Assets Under Management | 1,213.3 billion | 1,250.6 billion | 1,451.4 billion |
| Net New Assets | (39.2) billion | (61.1) billion | (7.6) billion |
Material Changes vs. Prior Period
- Revenue Collapse: Reported net revenues turned negative at CHF -528 million in 2Q23, a sharp decline from CHF 3,687 million in 2Q22. Adjusted revenues of CHF 1,750 million represented a 55% year-over-year decrease, driven by lower activity across all businesses, particularly the Investment Bank, and reduced net interest income in Wealth Management and Swiss Bank.
- Acquisition-Related Charges: The quarter included significant one-time costs related to the UBS acquisition, including CHF 2.2 billion in fair valuation adjustments, CHF 1.8 billion in impairments of internally developed software, and CHF 0.3 billion in integration costs.
- Impairments and Provisions: A CHF 1.0 billion goodwill impairment was recorded for the Asset Management unit due to projected profitability impacts from asset outflows. Additionally, CHF 1.3 billion in litigation provisions were recorded for previously disclosed legal matters.
- Balance Sheet Contraction: Total assets decreased 10% quarter-over-quarter and 34% year-over-year to CHF 483.7 billion. Risk-weighted assets and leverage exposure also declined significantly.
- Asset Outflows: Assets under management fell 16.4% year-over-year to CHF 1.21 trillion, with net outflows of CHF 39.2 billion in the quarter.
Guidance, Outlook, and Risks
The filing does not provide specific forward-looking financial guidance for the remainder of 2023. Management notes that the financial information is preliminary and subject to change, with the final 6M23 Financial Report expected around September 29, 2023. The outlook is heavily influenced by the integration of Credit Suisse into UBS.
Key Risks and Contingencies:
- Integration Risks: Success depends on the rapid and effective integration of operations, which may divert management attention and result in unforeseen expenses.
- Litigation and Reputational Harm: Ongoing negative consequences from the Archegos and supply chain finance fund matters, as well as other legal proceedings, pose significant risks.
- Market and Liquidity: Risks include market volatility, interest rate fluctuations, and the ability to maintain sufficient liquidity and access capital markets.
- Asset Flows: Continued outflows of deposits and assets could adversely affect profitability.
Investor Verification Checklist
- Verify the final reconciliation of non-GAAP adjusted results to US GAAP measures in the upcoming 6M23 Financial Report.
- Confirm the final status of the CHF 1.3 billion litigation provisions and any new legal developments post-acquisition.
- Monitor the progress of the integration of Credit Suisse into UBS, specifically regarding cost synergies and system consolidation.
- Track future net new asset flows to determine if the 16.4% year-over-year decline in Assets Under Management stabilizes.
- Review the final assessment of the CHF 1.8 billion impairment on internally developed software and its impact on future IT spending.