(CTN News) – It is estimated that UBS Group AG will suffer a financial loss of approximately $17 billion as a result of its acquisition of Credit Suisse Group AG, the bank said in a presentation early on Wednesday.
According to UBS, fair value adjustments of the combined group’s assets and liabilities will result in a negative impact of $13 billion. Additionally, UBS expects to incur $4 billion in litigation and regulatory costs as a result of outflows.
According to, by purchasing Credit Suisse for a fraction of its book value, it will book a one-time gain of $34.8 billion resulting from the so-called “negative goodwill.”
If closes the transaction next month as planned, the financial cushion will help absorb potential losses.
UBS stated that the estimates were preliminary and the numbers could change materially in the future. As well, the bank indicated that it might be forced to book restructuring provisions after that, but did not provide any specific figures.
According to Jefferies analysts, restructuring costs, litigation provisions, and the planned winding down of the non-core unit could amount to $28 billion.
In a shotgun merger carried out by Swiss authorities over a weekend in the middle of a global banking crisis, UBS agreed to purchase Credit Suisse for $3 billion in stock, as well as assuming up to 5 billion Swiss francs in losses that are likely to result from winding down parts of the business.
With this deal, the first rescue of a global bank since the 2008 financial crisis, the company will have more than $5 trillion in invested assets and over 120,000 employees across the globe.
It is estimated that the Swiss government will contribute up to 250 billion Swiss francs to the project.
In order to protect Credit Suisse from further losses, the Swiss government is providing a guarantee of up to 9 billion Swiss francs.
After years of scandals and losses, UBS has signaled that there will not be a rapid turnaround at Credit Suisse, a 167-year-old bank that came to the brink of collapse during the recent global banking sector turmoil.
As for this year’s second quarter and the entire year, Credit Suisse and its investment bank are expected to report substantial pretax losses.
Until its acquisition by UBS is completed, Credit Suisse will be subject to certain restrictions in its ability to do business.
Last week, UBS Group AG announced its intention to operate two separate parent companies – UBS AG and Credit Suisse AG – following the legal closure of the transaction.
Several years may be required for the integration process to be completed.
During this period, each institution will continue to operate its subsidiaries and branches, service its clients, and deal with counterparties as usual.