UBS Says Deal to Take Over Crisis-Hit Credit Suisse Leaves it With a Financial Hit of $17 Billion

UBS Group, which took over crisis-hit bank Credit Suisse in a deal backed by Switzerland's government in March this year, has said it has taken a financial hit of $17 billion due to the takeover.

The financial loss includes $13 billion from fair value adjustments of assets and liabilities and $4 billion spent on litigation and regulatory costs. UBS also said in regulatory filing that it is nearing the completion of the rescue deal for Credit Suisse.

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At the same time, UBS also said it would gain as much as $34.8 billion as it bought Credit Suisse for a fraction of its book value.

Swiss Government-Brokered Deal

The Swiss government brokered the deal in March after having come to the realization that it was not possible to restore confidence in the aftermath of unprecedented liquidity outflows and market volatility caused by the Credit Suisse crisis.

As per the deal, the 167-year-old Credit Suisse was acquired by UBS for 3 billion Swiss francs ($3.23 billion). UBS would also take over as much as $5.4 billion losses run up by the failed bank. Credit Suisse shareholders would get 1 UBS share for every 22.48 Credit Suisse shares under the deal. The deal will be completed by the end of the year.

Liquidity Assistance

The Swiss National Bank (SNB) offered to give liquidity assistance to UBS to complete the transaction. According to the Swiss central bank, the takeover deal includes $108 billion (100 billion Swiss francs) in liquidity assistance for UBS and Credit Suisse.

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On Wednesday, UBS said the estimates of the financial impact from the acquisition of Credit Suisse was preliminary. "The financial information lacks an estimate of restructuring provisions as these will be booked after the transaction closes," analyst Andreas Venditti said, according to Reuters.

Overall, the costs of the takeover, including restructuring costs, litigation costs and impact from the closing of non-core units could amount to $28 billion, according to Jeffrey's analysts.