UBS Group AG and Credit Suisse Group AG are likely to face worsening credit quality and falling demand for wealth-management and investment-banking services because of the pandemic, according to the Swiss National Bank.
Credit quality is expected to deteriorate both in Switzerland and abroad, the national bank said in its annual Financial Stability Report. A stock market correction has reduced the value of assets under management, which could lower demand for client and capital-market transactions, the SNB said.
“Both of these channels weigh on the profitability of the two globally active banks,” central bank said. Still, under the SNB’s baseline scenario, the impact will be limited by an expected rebound in the second half as well as stabilizing financial markets.
Credit Suisse last week joined other European and U.S. banks in giving a positive assessment of the second quarter, pointing to a recent boom in refinancing and greater client appetite for trading and investing as the pandemic eased. Switzerland’s second-largest bank had a turbulent start to the year, setting aside $1 billion in the first quarter to cover the impact of the coronavirus.
Crosstown rival UBS in April said it can withstand a surge in bad loans while warning that the unprecedented outbreak will put pressure on key streams of income at its wealth management business.
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