Amid the turmoil, Swiss bank Credit Suisse is under close scrutiny from financial markets, which fear a new financial crisis. In this context, its main Swiss competitor, UBS, has agreed to buy Credit Suisse for more than $2 billion, according to information from the British economic and financial daily Financial Times.
Credit Suisse, badly treated in the stock market last week after its main shareholder’s decision to return to the pot, is among the top 30 banks in the world from a systemic point of view. Her bankruptcy would send a shock wave through the entire global financial sector.
Reassurance before the markets open
That reports the financial daily financial times, UBS agreed to double the amount initially proposed to overcome the reluctance of Credit Suisse and one of its major shareholders.
The transaction would only be made in UBS shares and would value the Credit Suisse share at a price of 50 cents, instead of the initially proposed 25 cents, which remains much lower than Friday’s closing share price (1.86 francs). ).
The transaction is being examined in Bern by the federal government, which is already meeting urgently on Thursday and Saturday.
According to CH Media, the government should inform the parties involved from 5 p.m. and then hold a press conference to reveal the details of the agreement.
The merger between these giants, which are both part of the very secretive club of 30 too big to fail banks, should therefore be finalized and announced in time for the opening of Asian markets.
The hope is that this may be enough to prevent widespread panic.
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Race to the abyss
The banking sector has been under pressure since major central banks raised their rates sharply in an attempt to contain inflation. Many institutions have not prepared themselves after years of access to cheap money.
The recent bankruptcy of the United States Silicon Valley Bank and other regional US banks has increased investors’ anxiety and prompted them to sell the securities of the banks perceived as the weak links.
This is the case of Credit Suisse, which has gone from resounding scandals to setbacks in two years.
And despite management’s best efforts to tout a three-year restructuring plan, nothing worked. Investors voted with their feet and the Zurich establishment struggled to access liquidity at reasonable prices.
A 50 billion Swiss franc lifeline launched by the Swiss central bank on Wednesday after a black day on the stock market gave the bank only a brief respite.
Regulatory authorities and the federal government have faced enormous pressure from Switzerland’s main economic partners to clean up the situation before it infects the entire world.
According to Financial times et LookAt the end of last week, the bank’s customers withdrew 10 billion Swiss francs in one day.
Read also: Credit Suisse, SVB… “No risk” of contagion in France, the Banking Federation assures
Warranties
According to the Bloomberg agency, UBS requires the government to bear legal costs and potential losses, which could amount to billions of francs.
On Saturday, discussions about investment banking activity stumbled, according to the financial agency, one of the scenarios being examined is a resumption of wealth and asset management only with a sale of this branch.
By contrast, UBS, which spent several years recovering from the shock of the 2008 financial crisis and a massive state bailout, is beginning to reap the rewards of its efforts and it has taken enormous efforts from the authorities to ensure that management of the pew agreed put on the robe of the redeemer.
Depending on the configuration of the takeover, the Competition Commission could also raise its eyebrows.
The discussions also focus on the fate reserved for the Swiss arm of Credit Suisse, one of the group’s profitable parts that lost 7.3 billion Swiss francs last year and still counts on “significant” losses in 2023.
This branch brings together retail banking and lending to SMEs. One of the options being considered by analysts is that of an IPO, which could limit layoffs in Switzerland due to overlaps with UBS’s activities.
On Sunday, the union of bank employees in Switzerland “demands” the participation of the social partners in the talks, given the stakes “enormous” for the job.
“And when the stock market opens on Monday, Credit Suisse could be a thing of the past”predicted the tabloid Look.