An emergency takeover is approaching at the major Swiss bank Credit Suisse (CS), which has slipped deep into the crisis. In the room was a complete or partial takeover of the second largest Swiss bank by the larger competitor UBS.
According to a report in the Financial Times on Sunday evening, UBS has agreed to buy Credit Suisse for more than $2 billion. According to the Wall Street Journal, the Swiss National Bank (SNB) is said to have offered UBS a liquidity line of around USD 100 billion as part of the deal.
No official confirmation so far
There was initially no official confirmation of this mega transaction. The government in Bern has invited to a press conference on Sunday evening. No further details were initially given. A takeover of Credit Suisse by UBS would be the most significant banking merger in Europe since the financial crisis 15 years ago.
A possible deal was preceded by hectic crisis negotiations between the financial institutions and the Swiss banking supervisory authority over the entire weekend. The negotiations turned out to be very tough. The aim was to reach an agreement by Monday morning before the global stock exchanges opened.
The Swiss authorities wanted to change the country's laws to avoid a shareholder vote on the transaction, the Financial Times reported. Because the deal should be completed by Monday. According to reports, another option was state involvement.
It should be completed today
According to the "Financial Times", the share package between the two largest Swiss banks should be signed on Sunday evening. The price will be a fraction of Credit Suisse's closing price on Friday, leaving Credit Suisse shareholders virtually empty-handed, it said. UBS will pay more than CHF 0.50 per share in treasury stock, well below Credit Suisse's closing price of CHF 1.86 on Friday.
For the central bank, financial regulator and government of Switzerland, it is also about preventing a major global banking crisis. The government is under considerable pressure to stabilize the situation. Because Credit Suisse is one of the 30 global systemically important banks whose failure would shake the international financial system.
Swiss regulators are pushing UBS
According to reports, the Swiss regulators are pushing UBS to take over its smaller local rival. State guarantees are a prerequisite for such a mega deal. The Swiss government in Bern should issue a guarantee to cover the risks associated with the takeover, it said.
There are said to have been differences between the two money houses about the price. According to "Bloomberg", Switzerland is said to have considered a complete or partial nationalization of Credit Suisse as the only other option besides a takeover by UBS.
According to a report in the "Financial Times", UBS initially offered on Sunday to take over the local rival for up to one billion US dollars. According to another report, this offer did not meet with much approval from Credit Suisse.
The Swiss government met again for a crisis meeting in Bern on Sunday. The background is, among other things, that laws would have to be changed for a quick takeover of the bank.
Is the government taking emergency measures?
The Financial Times wrote that the Swiss government could take emergency measures to speed up the merger process. You could, for example, shorten the period of six weeks that is actually necessary for the consultation of shareholders in the event of a takeover.
According to a report by Sky News, the Bank of England has indicated its approval of a possible takeover of Credit Suisse by UBS. The British central bank has signaled to its international colleagues and UBS that it will support the emergency transaction, the broadcaster reported.
Credit Suisse was already reeling from scandals and mismanagement when it fell into another downward spiral after the collapse of the US bank Silicon Valley Bank (SVB). It received a loan commitment from the Swiss National Bank in the amount of 50 billion francs (almost 51 billion euros), but was only able to temporarily stop the downward trend in the share price.
7.3 billion euros loss
Credit Suisse reported an annual loss of CHF 7.3 billion (EUR 7.4 billion) for the past financial year. In the fourth quarter of 2022, CS customers had withdrawn immense sums - the bank recorded a net cash outflow of 110 billion francs. In contrast, UBS had made a profit of 7.6 billion dollars (currently 7.07 billion euros) in 2022. Credit Suisse's stock market value has fallen by more than two-thirds within twelve months - most recently to just EUR 7.46 billion. UBS, on the other hand, was worth the equivalent of around 60.8 billion euros.
The Swiss newspaper "Tages-Anzeiger" sees the takeover of the bank by UBS as the only way out. Customer trust is completely gone, and the outflow of money is immense. Several international banks have restricted their business with Credit Suisse. The loan of CHF 50 billion from the National Bank is of no use either. "Everyone is afraid of collapsing," said the paper.
A full merger would create one of the largest systemically important financial institutions in Europe. The balance sheet total of UBS with more than 72,000 employees amounted to the equivalent of 1030 billion euros in 2022, that of Credit Suisse with a good 50,000 employees to the equivalent of 535.44 billion euros.