SWISS INVESTMENT BANK UBS has agreed to buy Credit Suisse for more than $2 billion in a government backed deal which would combine Switzerland’s two largest banks.
“With the takeover of Credit Suisse by UBS, a solution has been found to secure financial stability and protect the Swiss economy in this exceptional situation,” read a statement from the Swiss National Bank, which pledged a loan of up to 100 billion (€101 billion) Swiss francs to support the combination.
Confidence in Credit Suisse fell last week after it acknowledged “material weakness” in its bookkeeping and fears grew that the demise of the US’s Silicon Valley Bank and Signature Bank could lead to the collapse of other institutions.
Swiss President Alain Berset said the government was confident that the takeover was the “best solution” for “restoring confidence that has been lacking the financial markets recently”.
Credit Suisse, the country’s second-biggest bank after UBS, “has been a source of worry for several months”, he said, adding that turbulence on the markets in recent days showed that “the necessary confidence” in the bank could not be restored.
Berset was speaking alongside UBS chairman Colm Kelleher and his Credit Suisse counterpart Axel Lehmann at a press conference in the capital Bern.
Finance Minister Karin Keller-Sutter told the press conference that bankruptcy for Credit Suisse could have caused “irreparable economic turmoil”.
The event came after a day of talks at the finance ministry on the future of Credit Suisse.
The central bank chief, Swiss National Bank chairman Thomas Jordan, and Marlene Amstad, head of the financial regulator FINMA, were also present.
The FT said shareholders would get 0.50 Swiss francs (€0.54) per share.
After suffering heavy falls on the stock market last week, Credit Suisse’s share price closed Friday at 1.86 Swiss francs, with the bank worth just over €8.1 billion.
Credit Suisse’s share price has tumbled from 12.78 Swiss francs in February 2021 due to a string of scandals that it has been unable to shake off.
UBS was being urged by the authorities to get a deal over the line before the stock exchange reopens at 8am tomorrow, in a bid to reassure investors and avoid a wave of contagious panic on the markets.
The Swiss authorities felt they had no choice but to push UBS into overcoming its reluctance, due to the enormous pressure exerted by Switzerland’s major economic and financial partners, fearing for their own financial centres, said Blick newspaper.
A merger of this scale – involving swallowing up all or part of a bank arousing growing investor unease – would normally take months.
The SonntagsZeitung newspaper called it “the merger of the century”.
Like UBS, Credit Suisse is one of 30 banks around the world deemed to be Global Systemically Important Banks – of such importance to the international banking system that they are considered too big to fail.
But the market movement seemed to suggest the bank was being perceived as a weak link in the chain.
Amid fears of contagion after the collapse of two US banks, Credit Suisse’s share price had plunged by more than 30 percent on Wednesday to a new record low of 1.55 Swiss francs. That saw the SNB step in overnight with a $54-billion lifeline.
After recovering some ground Thursday, its shares closed down eight percent on Friday at 1.86 Swiss francs as the Zurich-based lender struggled to retain investor confidence.
In 2022, the bank suffered a net loss of $7.9 billion and expects a “substantial” pre-tax loss this year.
To embed this post, copy the code below on your site
have your say