By Mark Thompson, CNN
Switzerland’s largest bank, UBS, has agreed to buy its Rival in crisis Credit Suisse in an emergency bailout deal aimed at stemming the panic in financial markets sparked by the failure of two US banks earlier this month.
“UBS today announced the acquisition of Credit Suisse,” the Swiss National Bank said in a statement. “This acquisition was made possible thanks to the support of the Swiss federal government, the Swiss Financial Market Supervisory Authority and the Swiss National Bank,” the central bank added.
He said the bailout would “ensure financial stability and protect the Swiss economy.”
UBS is paying 3 billion Swiss francs ($3.25 billion) for Credit Suisse, about 60% less than the bank was worth when markets closed on Friday. Credit Suisse shareholders will largely disappear, receiving just 1 UBS share for 22.5 Credit Suisse shares they own. Remarkably, the deal will not need shareholder approval after the Swiss government agreed to change the law so it can be completed quickly.
Credit Suisse had been losing the trust of investors and customers for years. In 2022, it posted its worst loss since the global financial crisis. But confidence collapsed last week after it acknowledged “material weakness” in its accounting and as the demise of Silicon Valley Bank and Signature Bank raised fears about weaker institutions at a time when skyrocketing interest rates have undermined the value of some financial assets.
Shares of the 167-year-old bank fell 25% during the week, money poured out of mutual funds it manages and, at one point, account holders withdrew deposits worth more than $10 billion a day, it reported. the Financial Times. An emergency loan from the Swiss National Bank failed to stop the bleeding.
Desperate to prevent the collapse from spreading through the global financial system on Monday, Swiss authorities had pushed hard for a private sector bailout, with limited state support, while reportedly considering Plan B: full or partial nationalization.
The emergency takeover was agreed after days of frantic negotiations between financial regulators in Switzerland, the United States and the United Kingdom. UBS and Credit Suisse are among the top 30 banks in the global financial system and together have almost $1.7 trillion in assets.
“Given the recent extraordinary and unprecedented circumstances, the announced merger represents the best available outcome,” Credit Suisse Chairman Axel Lehmann said in a statement.
“This has been an extremely challenging time for Credit Suisse and while the team has worked tirelessly to address many significant legacy issues and execute on its new strategy, we are compelled to find a solution today that will deliver a lasting result.”
The global headquarters of UBS and Credit Suisse are just 300 meters apart in Zurich, but the banks’ fortunes have been on very different paths recently. UBS shares have risen 15% in the past two years and posted a profit of $7.6 billion in 2022. It had a stock market value of about $65 billion on Friday, according to Refinitiv.
Credit Suisse shares have lost 84% of their value over the same period, posting a loss of $7.9 billion last year. It was worth just $8 billion at the end of last week.
Dating back to 1856, Credit Suisse traces its roots to the Schweizerische Kreditanstalt (SKA), which was created to finance the expansion of the railway network and the industrialization of Switzerland.
In addition to being the second largest bank in Switzerland, it looks after the wealth of many of the world’s richest people and offers global investment banking services. It had more than 50,000 employees at the end of 2022, 17,000 of them in Switzerland.
The Swiss National Bank said it would provide a loan of 100 billion Swiss francs ($108 billion) to UBS and Credit Suisse to increase liquidity.
The CNN Wire
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