[ad_1]
UBS agreed to buy rival Credit Suisse for 3 billion Swiss francs ($3.2 billion) on Sunday, with Swiss regulators playing a key role in the deal as governments sought to stem the contagion threatening the global banking system.
“With the takeover of Credit Suisse by UBS, a solution has been found to ensure financial stability and protect the Swiss economy in this exceptional situation,” the Swiss National Bank said in a statement, noting that the central bank is working with the Swiss bank. the government and the financial market supervisory authority. Switzerland achieve the merger of the country’s two largest banks.
As part of the deal, Credit Suisse shareholders will receive 1 UBS share for every 22.48 Credit Suisse shares they own.
“This acquisition is attractive to UBS shareholders, but let’s be clear, as far as Credit Suisse is concerned, this is an emergency bailout. We have structured a deal that preserves the value left in the business and limits our risk,” said UBS Chairman Colm Kelleher.
According to UBS, the combined bank will have $5 trillion in invested assets.
The Swiss National Bank has promised to provide a loan of up to 100 billion Swiss francs ($108 billion) to support the takeover. The Swiss government has also provided a loss guarantee of up to CHF 9 billion on certain assets above the threshold “to mitigate any risks to UBS,” the government said in a separate statement.
“This is a commercial solution, not a bailout,” Swiss Finance Minister Karin Keller-Sutter said at a press conference on Sunday.
The deal with UBS was agreed before markets reopened for trading on Monday after Credit Suisse shares posted their worst weekly drop since the start of the coronavirus pandemic. The losses came despite a new loan of up to 50 billion Swiss francs ($54 billion) from the Swiss central bank last week to reverse the downturn and restore confidence in the bank.
Credit Suisse has already faced a string of losses and scandals, and sentiment has faltered again over the past two weeks as US banks bounced back from the collapse of Silicon Valley Bank and Signature Bank.
US regulators’ support for uninsured deposits in failing banks and the creation of a new funding mechanism for troubled financial institutions have failed to stop the shock and threaten to take on more banks both in the US and abroad.
Credit Suisse chairman Axel Lehmann said at a press conference that the financial instability caused by the collapse of US regional banks hit the bank at the wrong time.
Despite regulatory involvement in the merger, the deal gives UBS autonomy to manage the acquired assets as it sees fit, which could mean a significant job cut, sources told CNBC’s David Faber.
The scope and potential impact of Credit Suisse on the global economy is far greater than that of regional US banks, which have pressured Swiss regulators to find a way to merge the country’s two largest financial institutions. Credit Suisse’s balance sheet is about double that of Lehman Brothers when it collapsed, and stood at around CHF530 billion at the end of 2022. The situation is even more important.
The merger of the two rivals was not without difficulties, but the desire to avert a systemic crisis won out in the end. UBS originally offered to buy Credit Suisse for about $1 billion on Sunday, according to multiple media reports. Credit Suisse reportedly rejected the offer, saying it was too low and would hurt shareholders and employees, people with knowledge of the matter told Bloomberg.
By Sunday afternoon, UBS was in talks to buy the bank for a “significant” sum of more than CHF 1 billion, sources said. said Faber of CNBC. According to him, the price of the deal increased during the day of negotiations.
Credit Suisse lost about 38% of its deposits in the fourth quarter of 2022 and said in its delayed annual report early last week that the outflow hasn’t stopped yet. It reported a net loss for the full year of 7.3 billion Swiss francs in 2022 and expects further “substantial” losses in 2023.
The bank had previously announced a massive strategic overhaul in an attempt to address these chronic problems, and was replaced in July by current CEO and veteran Credit Suisse Ulrich Koerner.
[ad_2]
