Swiss bank UBS is ready to take over struggling rival Credit Suisse, but only for a knockdown price, according to reports today.
It comes amid urgent talks aimed at saving the beleaguered bank from a bloodbath when markets reopen.
The two biggest banks in the wealthy Alpine nation famous for its banking prominence have been in negotiations with the government throughout the weekend, with the central bank and financial regulators all involved.
The Financial Times, which was the first Friday to report on the prospect of Switzerland’s biggest bank swallowing up Credit Suisse, said UBS had offered to buy it for up to $1 billion.
The transaction would be worth 25 cents (0.23 Swiss francs) per Credit Suisse share, the FT said.
Swiss bank UBS is ready to take over struggling rival Credit Suisse, but only for a knockdown price, according to information released today
It comes amid urgent talks aimed at saving embattled bank Credit Suisse from a bloodbath as markets reopen
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 following a series of scandals.
Bloomberg reported that Credit Suisse was rejecting UBS’s offer, with the backing of its largest shareholder, saying it was too low.
But time is running out until the Swiss stock exchange reopens at 08:00 GMT on Monday.
UBS is under pressure from the authorities to reach an agreement in time, in order to reassure investors and avoid a contagious wave of panic on the markets.
A merger of this magnitude – involving the absorption of all or part of a bank with growing investor unease – would normally take months.
UBS will have had a few days.
Swiss authorities felt they had no choice but to push UBS to overcome its reluctance after enormous pressure from Switzerland’s main economic and financial partners, fearing for their own financial centres, the newspaper reports. Blick.
Vice Chairman of the Board of Directors of UBS Group AG Lukas Gaehwiler (left) and Member of the Executive Board of UBS Group AG Markus Ronner (right) walking in front of the Bernerhof, headquarters of the Federal Department of Finance FDF
While under Swiss rules, UBS would generally have to consult with shareholders for six weeks, but could use emergency measures to skip the consultation period and a shareholder vote, the FT said, citing unnamed sources.
Members of the Swiss government, including President Alain Berset, were reportedly filmed on Sunday morning at the Finance Ministry in Bern.
The government did not respond when contacted on Sunday.
“The unthinkable is becoming reality: Credit Suisse is about to be taken over by UBS,” said the SonntagsZeitung newspaper.
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.
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 takeover) if it had no other option.”
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 would potentially be at risk,” he added, calling for the creation of a task force to deal with the situation.
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.
Amid fears of contagion after the collapse of two US banks, Credit Suisse’s share price plunged more than 30% on Wednesday to hit 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.