Chairman Axel Lehmann said the merger represents the “best result available”.
Bern, Switzerland:
UBS will take over struggling Swiss rival Credit Suisse for $3.25 billion following crisis talks on Sunday aimed at preventing the troubled bank from triggering a wider international banking crisis.
The government said the deal involving Switzerland’s biggest bank taking control of the second-biggest was vital to prevent irreparable economic turmoil from spreading across the country and beyond.
The move was hailed in Washington, Brussels and London as a move that would support financial stability.
After a dramatic day of talks at the finance ministry in the capital Bern – and with time running out before markets open on Monday in Asia and then Europe – the details of the takeover were announced at a press conference.
Swiss President Alain Berset was accompanied by UBS Chairman Colm Kelleher and his Credit Suisse counterpart Axel Lehmann, as well as the Swiss finance minister and central bank leaders from the Swiss National Bank (SNB) and the financial regulator FINMA.
The wealthy Alpine nation is famous for its banking prominence and Berset said the takeover was the “best solution to restore the confidence that has lately been lacking in financial markets”.
If Credit Suisse went into a tailspin, it would have had “incalculable consequences for the country and for international financial stability,” he said.
Credit Suisse said in a statement that UBS would take it over for “a merger consideration of three billion Swiss francs ($3.25 billion)”, with Credit Suisse shareholders receiving one UBS share for every 22.48 shares of the Swiss credit.
“Given the recent extraordinary and unprecedented circumstances, the announced merger represents the best outcome available,” Lehmann said.
Risk of “enormous collateral damage”
Finance Minister Karin Keller-Sutter said the bankruptcy of Credit Suisse could have caused “irreparable economic turbulence” and “enormous collateral damage” for the Swiss financial market, not to mention the “risk of contagion” for other banks, including UBS itself.
The recovery has “laid the foundations for greater stability both in Switzerland and abroad”, she said.
The deal was warmly received internationally, with European Central Bank chief Christine Lagarde welcoming the “swift action”.
The decisions taken in Bern “contribute to restoring orderly market conditions and ensuring financial stability. The euro area banking sector is resilient, with strong capital and liquidity positions,” she said.
Fed Chairman Jerome Powell and Treasury Secretary Janet Yellen said in a joint statement, “We welcome the announcements made today by the Swiss authorities to support financial stability.”
Britain also said the deal would “support financial stability”.
Keller-Sutter said his American and British colleagues were “really concerned that there could be a bankruptcy of Credit Suisse, with all the losses.”
The SNB announced that 100 billion Swiss francs of liquidity would be available.
Keller-Sutter insisted the deal was “a trade fix, not a bailout.”
UBS Chairman Kelleher added: “We are committed to making this transaction a great success.
“It is absolutely essential for the financial structure of Switzerland.
“UBS will remain rock solid,” he insisted.
Too big to fail?
Like UBS, Credit Suisse was one of 30 banks around the world considered global systemically important banks – of such importance 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.
Amid fears of contagion after the collapse of two US banks, Credit Suisse’s share price had plunged more than 30% on Wednesday to a new record high of 1.55 Swiss francs. This saw the SNB step in overnight with a $54 billion lifeline.
After regaining some ground on Thursday, its shares closed down 8% on Friday at 1.86 Swiss francs as the Zurich-based lender struggled to retain investor confidence.
In 2022, the bank incurred a net loss of $7.9 billion and expects a “substantial” pre-tax loss this year.
A statement from UBS said Credit Suisse shareholders would receive 0.76 Swiss francs per share.
After suffering heavy stock market declines last week, Credit Suisse’s share price closed at 1.86 Swiss francs on Friday, with the bank valuing just over $8.7 billion.
Credit Suisse’s share price fell by 12.78 Swiss francs in February 2021 due to a series of scandals that it could not shake off.
The Swiss Association of Bank Employees said there was “an important issue” for the 17,000 employees of Credit Suisse, “and therefore also for our economy”.
In addition, tens of thousands of jobs outside the banking sector were potentially at risk, he added.
(Except for the title, this story has not been edited by NDTV staff and is published from a syndicated feed.)
