by Noele Illien

ZURICH (Reuters) – UBS will release its first quarterly results since the hasty takeover of rival Credit Suisse on Thursday, a much-anticipated release that should shed light on the deal’s impact and the inner workings of the new banking giant.

In addition to the second quarter figures, the release of which was delayed by more than a month due to the complexity of the transaction, investors will be combing through the report for indications of how the biggest bank bailout since the global financial crisis.

Here’s what investors and analysts will be looking to know on Thursday:

THE EXTENT OF DAMAGE AT CREDIT SUISSE

UBS’s results will include a section reserved for Credit Suisse, which will detail the group’s problems.

These indications will make it possible to gauge the extent of the damage suffered by Credit Suisse, and in particular by its branch of wealth management in difficulty.

Credit Suisse has already indicated that it expects to post a heavy loss in 2023.

Client confidence remains shaken by the bailout, and outflows likely continued in the April-June period.

The assets managed by the subsidiary, which amounted to 500 billion Swiss francs (522.79 billion euros) at the end of March, will therefore decrease further.

LEAKAGE OF UBS CUSTOMERS?

High net worth clients often kept accounts at both UBS and Credit Suisse, so as not to put all their eggs in one basket, and some might decide to transfer some of their money elsewhere to spread the risk.

In previous quarters, UBS saw strong inflows as it benefited from the search for safer alternatives by Credit Suisse clients.

Now that the two institutions have merged, this effect could be reversed, according to banking analysts. Benjamin Goy, an analyst at Deutsche Bank, said he expects outflows of up to 100 billion Swiss francs over time.

This week’s results will show if this shift has already started.

THE FUTURE OF THE SWISS BANK

Many observers are waiting to see what UBS will do with the Swiss arm of Credit Suisse.

UBS chief executive Sergio Ermotti has promised to make a decision by the end of the summer. Many analysts expect an announcement this week.

A spin-off or listing of the Swiss business are seen as options, as is full integration, which Sergio Ermotti said is likely but not a popular option in Switzerland.

Several Swiss politicians, campaigning for national elections, have come out against such a measure, fearing that it will lead to the loss of thousands of jobs.

However, UBS may be able to evade this political pressure, the bank having declared that it would not use the financial guarantees granted by the government for the operation, without therefore resorting to the Swiss taxpayer.

DISMISSALS

When announcing the takeover in March, UBS said it expected savings of more than $8 billion, 75% of which would come from cutting the bank’s staff to 120,000 with the merger.

Analysts expect UBS to cut around a third of the combined group’s global workforce, or 30,000 to 35,000 jobs.

The full integration of the domestic branch of Credit Suisse could affect up to 10,000 jobs in Switzerland alone.

Thursday’s results are expected to show how much Credit Suisse’s workforce, which stood at 48,000 at the end of March, has already shrunk. While most departures have been voluntary so far, bankers are preparing for waves of layoffs.

RISING PROFIT

According to a consensus by the Swiss bank, analysts expect UBS to post a net profit of $33.45 billion for the second quarter.

This huge figure largely reflects a one-time boost to bottom line, due to the takeover of Credit Suisse for a fraction of its value. Analysts see it as just one example of how a complex merger can distort reality and say they will focus on other aspects.

“We will focus more on the size, speed and breadth of the restructuring program,” said Thomas Hallett, analyst at Keefe, Bruyette & Woods.

NON-ESSENTIAL ASSETS

UBS is expected to release additional information about a set of assets it does not want to keep from Credit Suisse, which includes loans, legacy assets and structured products.

Analysts are hoping to learn more about the size of this portfolio, how long it will take to liquidate and the costs associated with it.

(Report Noele Illien, Corentin Chapron, edited by Blandine Hénault)

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