UBS AG is exploring buying all or part of Credit Suisse Group AG at the urging of Swiss regulators after a crisis of confidence in its smaller rival hit the market, according to people familiar with the matter.
Swiss officials are pressing UBS to study ways in which it could participate in the Credit Suisse settlement, the people said, speaking on condition of anonymity. Discussions are still ongoing and it is unclear whether any deal will be reached, the people said.
The boards of Switzerland’s largest banks are expected to meet separately this weekend to weigh the idea of a merger, the Financial Times reported earlier on Friday, in talks orchestrated by the Swiss National Bank and regulator Finma.
The aim is to announce a deal between the two banks by Sunday night, according to a person familiar with the matter, who asked not to be named. However, the situation remains fluid and subject to change.
A government-brokered deal would address the debacle at Credit Suisse, which sent shockwaves through the global financial system this week after panicked investors dumped its shares and bonds after the collapse of several smaller U.S. banks. Liquidity support from the Swiss National Bank briefly halted losses, but the upheaval in the market raises the risk that clients or counterparties will continue to flee, with possible repercussions for the wider industry.
The government, central bank and Finma have been in close contact to discuss ways to further stabilize Credit Suisse, Bloomberg reported earlier this week. Ideas floated at the time included a spin-off of the bank’s Swiss unit and an orchestrated tie-up with UBS, people familiar with the matter have previously said. Executives at UBS and Credit Suisse have been opposed to the planned merger, people familiar with the matter said earlier this week.
UBS would prefer to focus on its own independent wealth-focused strategy and would prefer not to take on the risks associated with Credit Suisse, the people said. Credit Suisse is finding time to turn things around after winning a $54 billion central bank credit line, they said.
Credit Suisse’s market capitalization has fallen from a peak of more than 100 billion Swiss francs in 2007 to about 7.4 billion Swiss francs ($8 billion). UBS has a market capitalization of 60 billion Swiss francs.
Credit Suisse, which dates back to 1856, has been battered in recent years by a string of bankruptcies, scandals, leadership changes and legal troubles. The company’s 7.3 billion franc loss last year wiped out the previous decade’s profits.
Clients withdrew more than $100 billion in assets in the last three months of last year as concerns mounted about their finances, and the outflow continued even after shareholders raised CHF4 billion in capital.