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UBS' first quarter clues about Credit Suisse's second quarter fate

UBS' first quarter results are out - and they're important ones.

They're the first set of results since the announcement of the bank's shotgun wedding to its fallen-on-hard-times-cousin, Credit Suisse. A lot of speculation has been made about what's going to happen to CS's investment bank, but for the moment UBS isn't saying too much on the matter.

UBS's presentation today says Credit Suisse will be "enhancing client franchises" and that Credit Suisse's investment bank specifically will be "diversifying our capabilities without compromising our unique model." Nonetheless, the cost income ratio in Credit Suisse's investment bank has crept higher to 79% (from 68% in Q1 last year) and the return on equity in the unit has fallen from 28% to a still handsome 15%, such that UBS may feel it doesn't have too much room to be accommodating.

Beyond this, UBS isn't (yet) giving much detail. It says it shares a "complimentary" investment banking and asset management business with CS, which provided "strategic scale" in certain target markets. UBS put aside $70m for M&A fees related to the Credit Suisse deal.

UBS results were pretty average. It outperformed Credit Suisse on all counts except for its debt capital markets (DCM) performance, and other than a poor ECM performance, was more or less on par with the American banks. Nonetheless, UBS said its financing revenues, which rose 21% and were driven by prime brokerage in APAC and the Americas, were up 21%, making it the best first quarter on record. Needless to say, Credit Suisse closed its own prime broking business after the Archegos affair which originated there and lost $5.5bn contributed to the bank's undoing.

CS' own first quarter results, which came yesterday, were... Painful. The investment bank lost nearly $350m by itself, whilst the bank overall saw asset outflows of $68.6bn. 

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AUTHORZeno Toulon Reporter

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