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Credit Suisse sees Q3 loss of $1.6 billion from reclassifying loans

The logo of Credit Suisse is seen outside its office building in Hong Kong

ZURICH (Reuters) -Credit Suisse expects to make a third quarter loss of about $1.6 billion from reclassifying loans linked to its non-core and legacy businesses, the bank, which is now part of UBS, said on Friday.

In addition, a decision was made to wind down certain management arrangements, which may result in a loss of up to $600 million in the third quarter of this year, the bank added in a financial report.

UBS agreed in March to buy Credit Suisse for a knockdown price of 3 billion Swiss francs ($3.3 billion) and assume up to 5 billion francs in losses in a rescue orchestrated by Swiss authorities with Switzerland's second-largest bank on the edge of collapse.

Following the takeover, UBS has decided which Credit Suisse assets it will retain and which will be placed in a non-core and legacy division to be wound down over time.

UBS's Vice-Chairman Lukas Gehwiler said earlier this month it was possible that Credit Suisse could generate further losses in the second half of the year.

Credit Suisse also upped its provisions to cover potential losses from litigation to 1.48 billion Swiss francs.

The figure was an increase from the 1.367 billion francs the bank announced in half year figures at the end of August.

The bank is involved in several cases, including its dealings with U.S. family office Archegos Capital Management and loans granted to Mozambique to develop its fishing industry.

In the financial report for the first six months of 2023, Credit Suisse also said its suffered net asset outflows of 100.3 billion Swiss francs from the end of 2022.

The biggest outflow was in the wealth management business, where 74 billion francs in assets were withdrawn, with money pulled out across all regions.

The Swiss domestic business suffered a net outflow of 14.6 billion francs as confidence collapsed in the bank and panicked customers withdrew funds.

($1 = 0.9132 Swiss francs)

(Reporting by John Revill and Oliver HirtEditing by Rachel More and Mark Potter)