ZURICH: UBS was against the clock on Sunday in talks to finalize a mammoth takeover of struggling rival Swiss bank Credit Suisse and reassure investors ahead of markets reopening.
Switzerland’s biggest bank, UBS, is under pressure from authorities to strike a deal, in a bid to head off a contagious wave of panic in markets on Monday.
The wealthy Alpine nation is the largest banks were in urgent negotiations over the weekend with the country’s banking and regulatory authorities, multiple media outlets reported.
The generally well-informed tabloid Blick said UBS would buy Credit Suisse in a deal to be sealed at a special meeting in Bern on Sunday, bringing together Swiss government and bank executives.
A merger of this magnitude, swallowing up all or part of a bank with growing investor unease, would normally take months. UBS will have had a few days.
However, the Swiss authorities felt that they had no choice but to push UBS to overcome its reluctance, due to the enormous pressure exerted by Switzerland’s main economic and financial partners, fearing for their own financial centers, Blick said.
“Everything points to a Swiss solution on Sunday. And when the stock market opens on Monday, Credit Suisse could be a thing of the past,” the newspaper said.
Credit Suisse, the country’s national central bank, the SNB, and Swiss financial watchdog FINMA all declined to comment when contacted by AFP about the possibility of a UBS takeover. .
The Swiss government held an urgent meeting to discuss the situation on Saturday evening in the capital Bern. The government spokesman declined to comment on the talks, Swiss news agency ATS reported.
An acquisition of this size is of formidable complexity.
UBS would require state guarantees to cover legal costs and potential losses, according to a Bloomberg report, citing unnamed sources.
The SonntagsZeitung newspaper called it the “merger of the century”.
“The unthinkable becomes reality: Credit Suisse is about to be acquired by UBS”, indicates the weekly.
The government, FINMA and the SNB “see no other option”, she said.
“The pressure from abroad had become too much – and the fear that the faltering Credit Suisse could trigger a global financial crisis,” he said.
Like UBS, Credit Suisse is one of 30 banks around the world considered global systemically important banks – so important to the international banking system that they are considered too big to fail.
But the market movement seemed to suggest that the bank was seen as a weak link in the chain.
“We are now waiting for a definitive and structural solution to the problems of this bank,” French Finance Minister Bruno Le Maire told Le Parisien newspaper. “We remain extremely vigilant.”
According to the Financial Times newspaper, Credit Suisse clients withdrew 10 billion Swiss francs ($10.8 billion) in deposits in a single day at the end of last week – a measure of declining confidence in the bank.
After a turbulent week in the stock market, which forced the SNB to step in with a lifeline of $54 billion, Credit Suisse was worth just over $8.7 billion as of Friday night, not much for a bank considered one of the 30 key institutions in the world.
FINMA and the SNB have said Credit Suisse “meets the capital and liquidity requirements” imposed on these banks, but mistrust remains.
Amid fears of contagion after the collapse of two banks in the United States, Credit Suisse’s share price plunged more than 30% on Wednesday to hit a new record high of 1.55 Swiss francs.
After regaining some ground on Thursday, shares of Credit Suisse closed down 8% on Friday at 1.86 Swiss francs apiece as the Zurich-based lender struggled to retain investor confidence.
Credit Suisse has been plagued by a series of scandals in recent years. The shares were worth 12.78 Swiss francs in February 2021.
In 2022, the bank incurred a net loss of $7.9 billion and expects a “substantial” pre-tax loss this year.
“This is a bank that never seems to get its house in order,” IG analyst Chris Beauchamp commented in a market note this week.
The idea of the biggest Swiss banks joining forces has arisen over the years, but has generally been rejected due to competition concerns and risks to the stability of the Swiss financial system.
“Credit Suisse management, even if forced to do so by the authorities, would only choose (this option) if they had no other option,” said David Benamou, Chief Investment Officer of Axiom Alternative Investments, based in Paris.
Switzerland’s biggest bank, UBS, is under pressure from authorities to strike a deal, in a bid to head off a contagious wave of panic in markets on Monday.
The wealthy Alpine nation is the largest banks were in urgent negotiations over the weekend with the country’s banking and regulatory authorities, multiple media outlets reported.
The generally well-informed tabloid Blick said UBS would buy Credit Suisse in a deal to be sealed at a special meeting in Bern on Sunday, bringing together Swiss government and bank executives.
A merger of this magnitude, swallowing up all or part of a bank with growing investor unease, would normally take months. UBS will have had a few days.
However, the Swiss authorities felt that they had no choice but to push UBS to overcome its reluctance, due to the enormous pressure exerted by Switzerland’s main economic and financial partners, fearing for their own financial centers, Blick said.
“Everything points to a Swiss solution on Sunday. And when the stock market opens on Monday, Credit Suisse could be a thing of the past,” the newspaper said.
Credit Suisse, the country’s national central bank, the SNB, and Swiss financial watchdog FINMA all declined to comment when contacted by AFP about the possibility of a UBS takeover. .
The Swiss government held an urgent meeting to discuss the situation on Saturday evening in the capital Bern. The government spokesman declined to comment on the talks, Swiss news agency ATS reported.
An acquisition of this size is of formidable complexity.
UBS would require state guarantees to cover legal costs and potential losses, according to a Bloomberg report, citing unnamed sources.
The SonntagsZeitung newspaper called it the “merger of the century”.
“The unthinkable becomes reality: Credit Suisse is about to be acquired by UBS”, indicates the weekly.
The government, FINMA and the SNB “see no other option”, she said.
“The pressure from abroad had become too much – and the fear that the faltering Credit Suisse could trigger a global financial crisis,” he said.
Like UBS, Credit Suisse is one of 30 banks around the world considered global systemically important banks – so important to the international banking system that they are considered too big to fail.
But the market movement seemed to suggest that the bank was seen as a weak link in the chain.
“We are now waiting for a definitive and structural solution to the problems of this bank,” French Finance Minister Bruno Le Maire told Le Parisien newspaper. “We remain extremely vigilant.”
According to the Financial Times newspaper, Credit Suisse clients withdrew 10 billion Swiss francs ($10.8 billion) in deposits in a single day at the end of last week – a measure of declining confidence in the bank.
After a turbulent week in the stock market, which forced the SNB to step in with a lifeline of $54 billion, Credit Suisse was worth just over $8.7 billion as of Friday night, not much for a bank considered one of the 30 key institutions in the world.
FINMA and the SNB have said Credit Suisse “meets the capital and liquidity requirements” imposed on these banks, but mistrust remains.
Amid fears of contagion after the collapse of two banks in the United States, Credit Suisse’s share price plunged more than 30% on Wednesday to hit a new record high of 1.55 Swiss francs.
After regaining some ground on Thursday, shares of Credit Suisse closed down 8% on Friday at 1.86 Swiss francs apiece as the Zurich-based lender struggled to retain investor confidence.
Credit Suisse has been plagued by a series of scandals in recent years. The shares were worth 12.78 Swiss francs in February 2021.
In 2022, the bank incurred a net loss of $7.9 billion and expects a “substantial” pre-tax loss this year.
“This is a bank that never seems to get its house in order,” IG analyst Chris Beauchamp commented in a market note this week.
The idea of the biggest Swiss banks joining forces has arisen over the years, but has generally been rejected due to competition concerns and risks to the stability of the Swiss financial system.
“Credit Suisse management, even if forced to do so by the authorities, would only choose (this option) if they had no other option,” said David Benamou, Chief Investment Officer of Axiom Alternative Investments, based in Paris.
