UBS is acquiring industry peer Credit Suisse for 3 billion Swiss francs. They will pay 0.76 Swiss francs in UBS shares. The opening offer was initially 0.25 Swiss francs per share. As recently as Friday, Credit Suisse closed at a closing price of 1.86 Swiss francs, representing a market capitalisation of 7.3 billion Swiss francs.
The combined entity will become Europe’s largest Globally Systemically Important Bank, also known as a G-SIB.
With the deal, announced Sunday night, regulators prevented the crisis from proliferating on global stock markets on Monday. At Credit Suisse, wealthy clients were withdrawing as much as 10 billion Swiss francs a day last week as people lost faith in the bank’s future.
A special Swiss law will be used to push through the merger, keeping shareholders from voting in order to push to transaction forward. “The merger can be implemented without approval of the shareholders,” the merger statement said.
Liquidity lines
The deal, which was explained on Sunday by top executives of the two banks and the Swiss finance ministry, further involves the Swiss National Bank (SNB) providing a liquidity line of 100 billion Swiss francs , backed by the Swiss government. In addition, the government guarantees 9 billion in losses, a facility that UBS can claim. The first 5 billion in losses, it has been agreed, will be borne by UBS.
The acquisition of Credit Suisse by UBS creates the largest systemic bank in Europe. UBS has 1100 billion dollars on its balance sheet, Credit Suisse 575 billion dollars, according to the Financial Times, which first reported the negotiations between the two banks on Friday. SNB and regulator Finma were keen to restore confidence in the country’s banking sector before the weekend.
Credit Suisse knocked on SNB’s door last week for a 50 billion Swiss franc emergency credit line. This happened after the Swiss bank lost 25 per cent of its stock market value at some point and a major Arab shareholder publicly stated it would not come to its aid. At the same time, wealthy clients exited the bank en masse, fearing that Credit Suisse’s continuity would not be guaranteed.
Credit Suisse and UBS have become their mutual mirror images over the past two years: the former’s share price fell 70 per cent in three years, while UBS’s rose 120 per cent; UBS has a market capitalisation of $56.6 billion, compared with $8 billion for Credit Suisse. In addition, UBS posted $7.6 billion in profits in 2022, against a loss for Credit Suisse of $7.9 billion, the FInancial Times reported.
BlackRock not participating
The Financial Times reported that BlackRock would be in the race for a rival bid for Credit Suisse, but that news was denied by the world’s largest asset manager in a one-line press release on Saturday afternoon: In reaction to market rumours: “BlackRock is not participating in any plans to acquire all or any part of Credit Suisse, and has no interest in doing so.”
However, Swiss newspaper Tages-Anzeiger reported this weekend that Philippe Hildebrand, the former president of the Swiss national bank, was taking part in the talks. Although Hildebrand has been with BlackRock in the position of vice-president since 2012, he still has a lot of authority and authority in Switzerland as a former central bank president.
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