UBS is ready to take over its ailing Swiss rival Credit Suisse, but only at a bargain price, reports said Sunday amid urgent talks aimed at saving the ailing bank from a bloodbath when markets reopen.
The two largest banks in the wealthy Alpine nation, known for its prominent position in the banking sector, held negotiations with the government, the central bank and all the financial regulators involved all weekend.
The Financial Times newspaper, which on Friday first reported on the prospect of Switzerland’s largest bank gobbling up Credit Suisse, said UBS had offered to buy it for up to $1 billion.
The transaction would be worth 25 centimes (0.23 Swiss francs) per Credit Suisse share, the FT said.
After the stock market suffered severe falls last week, Credit Suisse shares closed at 1.86 Swiss francs on Friday, with the bank worth just over $8.7 billion.
Credit Suisse’s share price has plummeted from 12.78 Swiss francs in February 2021 due to a series of scandals it couldn’t shake off.
Bloomberg reported that Credit Suisse, with the support of its largest shareholder, pushed back the UBS bid because it believed it was too deep.
time is money
But the clock is ticking until the Swiss stock market reopens at 0800 GMT on Monday.
UBS is being urged by authorities to get a deal through the line in time to reassure investors and avoid a wave of contagious panic in the markets.
A merger of this magnitude – in which a bank is swallowed up in whole or in part, causing growing unease among investors – would normally take months. UBS will have had a few days.
The Swiss authorities saw no other choice but to press UBS to overcome its reluctance, which was attributed to enormous pressure from Switzerland’s main economic and financial partners fearing for their own financial centers, according to Blick newspaper.
“If the stock exchange opens on Monday, Credit Suisse could be a thing of the past,” the tabloid said.
While Swiss law would normally require UBS to consult shareholders over six weeks, it could take contingency measures to skip the consultation period and a shareholder vote, the FT said, citing unnamed sources.
The newspaper 20 Minuten filmed Federal Councilors, including Federal President Alain Berset, on their way to the Ministry of Finance in Bern early on Sunday.
The government did not respond when contacted by AFP on Sunday.
“Fusion of the Century”
Credit Suisse, the country’s SNB and Switzerland’s financial regulator FINMA all declined to comment on the negotiations when contacted by AFP.
The Sunday newspaper called it “the fusion of the century”.
“The unthinkable is coming true: Credit Suisse is about to be taken over by UBS,” the weekly reads.
The government, FINMA and SNB “see no other option,” it said.
“The pressure from abroad had become too great – and the fear that the tumbling Credit Suisse could trigger a global financial crisis,” it said.
David Benamou, Chief Investment Officer of Paris-based Axiom Alternative Investments, said: “Credit Suisse management, even if forced to do so by the authorities, would only choose (a UBS acquisition) if there was no other solution gives.”
For the 17,000 employees of Credit Suisse, “a lot is at stake”, says the Swiss Bank Employees’ Association, “and therefore also for our economy”.
“In addition, tens of thousands of non-banking jobs could potentially be at risk,” she added, calling for a task force to be set up to deal with the situation.
Too big to fail?
Like UBS, Credit Suisse is one of 30 banks around the world that are considered global systemically important banks – with such importance to the international banking system that they are considered too big to fail.
But market action seemed to indicate that the bank was perceived as a weak link in the chain.
“We are now waiting for a final and structural solution to the problems of this bank,” French Finance Minister Bruno Le Maire told Le Parisien newspaper.
Amid fears of contagion following the collapse of two US banks, Credit Suisse shares fell more than 30 percent to a new record low of CHF 1.55 on Wednesday. That led to the SNB stepping in with a $54 billion lifeline overnight.
After gaining some ground on Thursday, shares closed up eight percent at CHF 1.86 on Friday as the Zurich-based bank struggled to maintain investor confidence.
In 2022, the bank suffered a net loss of $7.9 billion and expects a “substantial” pre-tax loss this year.
Read all the latest business news here
(This article was not edited by News18 staff and is published by a syndicated news outlet feed.)
You Can Find related services like Business to Business Service, Business School, Business Management Consultant, Business Development Service, Business Center, Business Brokerat Namelocals.