Swiss bank UBS has agreed to take over its troubled rival Credit Suisse after doubling its offer to $US2 billion ($3 billion) amid crisis talks aimed at sparing the embattled bank — which was worth about 7.4 billion francs ($11.9 billion) on Friday — from a bloodbath when the markets reopen.
The two largest banks in the wealthy Alpine nation famed for its banking prominence have been in negotiations throughout the weekend.
Swiss President Alain Berset said the government was confident that the takeover was the “best solution” for “restoring confidence that has been lacking the financial markets recently”.
Credit Suisse, the country’s second-biggest bank after UBS, “has been a source of worry for several months”, he said, adding that turbulence on the markets in recent days showed that “the necessary confidence” in the bank could not be restored.
Berset was speaking alongside UBS chairman Colm Kelleher and his Credit Suisse counterpart Axel Lehmann at a press conference in the capital Bern.
There were fiery scenes as a reporter asked Credit Suisse chairman Mr Lehmann: “Who is responsible for this disaster?”
“Look, hindsight is wonderful, and to point a finger — it’s a fact that since 2021… we never left the headlines,” he responded.
“We were overtaken by legacy situations by risks that materialised last year. We were effected by a market model that does no longer work in this market environment. Many clients have been very loyal for a very long time.
“Last autumn we had a social media storm and this had huge repercussions — more in the retail sector that in the wholesale sector. And too much becomes too much, and that’s when we reach this point.”
Finance Minister Karin Keller-Sutter told the press conference that bankruptcy for Credit Suisse could have caused “irreparable economic turmoil”.
The event came after a day of talks at the finance ministry on the future of Credit Suisse.
The central bank chief, Swiss National Bank chairman Thomas Jordan, and Marlene Amstad, head of the financial regulator FINMA, were also present.
The Financial Times newspaper, which was the first on Friday to report the prospect of Switzerland’s biggest bank swallowing up Credit Suisse, said UBS had agreed to buy it for $US2 billion, with its fellow Zurich-based lender having spurned an earlier offer of $US1 billion.
It comes amid reports the Swiss lender was in the process of cutting 9000 jobs to save itself.
‘Merger of the century’
The FT said shareholders would get 0.50 Swiss francs ($0.54) per share, with the deal to be done on Sunday before the markets open in Asia following the weekend break.
After suffering heavy falls on the stock market last week, Credit Suisse’s share price closed Friday at 1.86 Swiss francs, with the bank worth just over $8.7 billion.
Credit Suisse’s share price has tumbled from 12.78 Swiss francs in February 2021 due to a string of scandals that it has been unable to shake off.
UBS was being urged by the authorities to get a deal over the line before the stock exchange reopens at 0800 GMT on Monday, in a bid to reassure investors and avoid a wave of contagious panic on the markets.
The Swiss authorities felt they had no choice but to push UBS into overcoming its reluctance, due to the enormous pressure exerted by Switzerland’s major economic and financial partners, fearing for their own financial centres, said Blick newspaper.
A merger of this scale – involving swallowing up all or part of a bank arousing growing investor unease – would normally take months.
The SonntagsZeitung newspaper called it “the merger of the century”.
“The unthinkable becomes true: Credit Suisse is about to be taken over by UBS,” the weekly said.
“The pressure from abroad had become too great — and the fear that the reeling Credit Suisse could trigger a global financial crisis,” it added.
The Swiss Bank Employees Association said there was “a great deal at stake” for the 17,000 Credit Suisse staff, “and therefore also for our economy”.
In addition, tens of thousands of jobs outside of the banking industry were potentially be at risk, it added.
Too big to fail?
Like UBS, Credit Suisse is one of 30 banks around the world deemed to be 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 the bank was being perceived 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 by more than 30 per cent on Wednesday to a new record low of 1.55 Swiss francs. That saw the SNB step in overnight with a $54-billion lifeline.
After recovering some ground Thursday, its shares closed down eight per cent on Friday at 1.86 Swiss francs as the Zurich-based lender struggled to retain investor confidence.
In 2022, the bank suffered a net loss of $7.9 billion and expects a “substantial” pre-tax loss this year.
– With AFP