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Swiss Banking Giant UBS May Record $17B Loss from Credit Suisse Takeover

Swiss multinational banking giant UBS Group AG (SWX: UBSG) has revealed new details about what its liabilities are likely to be from the acquisition of Credit Suisse Group AG (SWX: CSGN). According to a CNBC report based on the filing, the firm lodged with the United States Securities and Exchange Commission (SEC), a total financial hit of $17 billion may be incurred from the forced takeover.

In its exact description, it is set to take on a total of $13 billion liability in fair value adjustments for the rebranded mega financial firm. The remaining $4 billion cost will be tapped from legal and regulatory costs.

The company revealed that the expedited nature of the acquisition made it conduct its due diligence on the company in a very hurried manner. Credit Suisse has been experiencing trouble in its finances for quite some time, however, its woes and subsequent bank runs reached its peak in March after which the Swiss regulator took it into its hands to broker a deal to prevent the ripple effect of what it termed an imminent collapse.

With just a few days given by FINMA for the company to conduct its due diligence, it revealed in its F-4 filing with the SEC that it might have assumed more liabilities than envisaged.

“If the circumstances of the due diligence affected UBS Group AG’s ability to thoroughly consider Credit Suisse’s liabilities and weaknesses, it is possible that UBS Group AG will have agreed to a rescue that is considerably more difficult and risky than it had contemplated,” UBS said in the Risk Factors section of the filing.

Agreeing to complete the acquisition implies UBS must have seen at least a positive prospect in the embattled rival in the long term.

According to the UBS post-acquisition plans, it is going to implement a phased integration of the Credit Suisse brand which may last a couple of years.

While the worry of the $17 billion deficit appears high at this time, the company is also looking at ways to offset this huge deficit. Per the CNBC report, one of its prominent options is the “one-off $34.8 billion gain from so-called “negative goodwill”, which refers to the acquisition of assets at a much lower cost than their true worth.”

UBS CEO Sergio Ermotti has revealed earlier that the acquisition of Credit Suisse will stir profit in the long run. The company is now being very strategic in how the acquired entity is managed and one of its strategies is to integrate top executives of Credit Suisse into the transition.

As such, it announced that Credit Suisse CEO Ulrich Koerner will join the executive board of the new entity last week, a move that has been applauded by experts across the board.

Swiss Banking Giant UBS May Record $17B Loss from Credit Suisse Takeover

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