UBS sees no need for provision on Credit Suisse AT1 bonds
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Hundreds of Asian bond holders, including Singapore investors, are seeking compensation from the write-off of the Credit Suisse AT1 bonds.
PHOTO: REUTERS
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ZURICH - UBS said on Oct 29 that it does not need to book a provision related to the 16.5 billion Swiss francs (S$26.9 billion) in Credit Suisse AT1 bonds that were written off before the bank acquired its former rival in 2023.
The bank made the statement after a court ruled earlier in October that a decision by Finma, the Swiss financial market regulator, to order the write-off of the AT1 bonds was unlawful, throwing into question who might become liable for the debt.
“In our view, there should be no liability in this matter,” UBS said in a statement issued with its financial results. “As a consequence, there is no need to record a provision.”
Finma later said it would appeal the decision; UBS also plans on challenging the ruling. The bank said the appeals process generally takes about a year, adding that any subsequent proceedings could take several years.
AT1 bonds, introduced after the 2008 financial crisis, are hybrid debt instruments that banks issue to bolster their capital buffers and absorb losses in times of stress.
Singapore law firm Drew & Napier said last week it is set to file claims against the Swiss government by the end of 2025, seeking compensation for hundreds of Asian bond holders, including Singapore investors.
UBS also reported on Oct 29 that third-quarter net profit surged 74 per cent to US$2.5 billion, handily beating expectations as revenues climbed amid financial market volatility caused by global tariff turmoil.
Net income attributable to shareholders of Switzerland’s biggest bank had been forecast to come in at US$1.29 billion, according to an analyst consensus estimate compiled by UBS.
But the bank said that macro uncertainties, a strong Swiss franc and higher US tariffs were clouding the outlook for the Swiss economy.
UBS expects deal activity to remain healthy in the fourth quarter, but noted that “sentiment can shift quickly as confidence in the outlook is tested”.
A prolonged US government shutdown could delay capital market activities, it added.
The release of legal provisions worth US$688 million, mainly related to the resolution of Credit Suisse’s residential mortgage-backed securities business and a UBS case in France, contributed to the earnings beat in the third quarter.
UBS attracted US$38 billion in net new money to its global wealth management division and US$18 billion to asset management, bringing total invested assets close to US$7 trillion.
Strong inflows from Asia more than offset outflows in the Americas, where UBS this week applied for a National Bank Charter which would allow it to offer more banking services to its wealth management clients in the United States.
In UBS’ investment banking division, revenues jumped 52 per cent year on year in global banking and 14 per cent in trading, marking a record third quarter for both these business areas as deal-making activity resumed.
Integration of its Credit Suisse further progressed, UBS said, adding that over two-thirds of Swiss-booked client accounts have been migrated. REUTERS
