The Credit Suisse earnings report came in Monday, shedding some light on the risk and reward potential for UBS. The bank had its best-ever quarterly profit, thanks to the write-off on the AT1 bonds, the first quarter profit of the lender was 14.4 billion before tax. The bonds were considered as capital instead of liabilities, and this created a write-up. However, not considering the one-time effects such as the bond write-off the actual pretax loss is 1.5 billion.
The bank is still bleeding deposits and has taken steps to increase its liquidity situation. The Bank of Switzerland also extended a greater credit line to them. The bank lost 70 billion in deposits this quarter, less than the outflows of last quarter.
But still, Credit Suisse is in terrible shape and it is not certain how much of UBS’s capital will be absorbed by CS losses. If UBS could manage this merger successfully, it stands to increase its book value by 75%. So, it might be a buy for investors who are not as risk-averse.
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