Switzerland’s biggest bank in focus for possible ‘merger of the century’

UBS to ask for public guarantees to cover legal costs, potential losses, report

Zurich Switzerland:

UBS raced against time on Sunday to negotiate a massive takeover of its struggling rival Credit Suisse and reassure investors before markets reopen.

Authorities are urging Switzerland’s largest bank, UBS, to reach an agreement as soon as possible to avoid a wave of contagious panic in markets on Monday, according to multiple media reports.

The rich Alpine country’s biggest banks have been in emergency talks all weekend, involving the government, central bank and financial regulators.

20 Minutes filmed members of the Swiss government, including President Alain Berset, traveling to the finance ministry in Bern early Sunday, and the building’s shutters had been lowered, the Swiss news agency ATS reported.

UBS is set to buy Credit Suisse, the Blick newspaper said, with the deal set to take place later on Sunday in Bern at a meeting of government and bank executives.

Mergers of this magnitude – involving the takeover of all or part of a bank and causing growing unease among investors – typically take months. UBS will have a few days.

However, amid intense pressure from Switzerland’s main economic and financial partners, who fear for their financial center, Swiss authorities believe they have no choice but to force UBS to overcome its reluctance, Blick said.

“Credit Suisse may be history when markets open on Monday,” the tabloid said.

While UBS normally has to consult shareholders within six weeks under Swiss rules, it could take urgent steps to skip the consultation period and shareholder vote, the Financial Times said, citing unnamed sources.

UBS will require a public guarantee to cover legal costs and potential losses, according to a Bloomberg report citing anonymous sources.

“Merger of the Century”

Credit Suisse, the SNB and Swiss financial watchdog FINMA declined to comment on the talks when contacted by AFP.

The government did not immediately respond when contacted by AFP on Sunday.

The SonntagsZeitung newspaper called it the “merger of the century”.

“The unthinkable has become reality: Credit Suisse is about to be bought by UBS,” the weekly said.

It claimed that the government, FINMA and SNB “see no other option”.

“The pressure from abroad is too great – and there are fears that crumbling Credit Suisse could spark a global financial crisis,” it said.

Too big to fail?

Like UBS, Credit Suisse is one of 30 banks in the world considered to be globally systemically important — banks so important to the international banking system that they are considered too big to fail.

But market moves appear to suggest the bank is seen as the weak link in the chain.

“We are now awaiting a clear and structural solution to the bank’s problems,” French Finance Minister Bruno Le Maire told Le Parisien newspaper. “We remain on high alert.”

Credit Suisse customers withdrew 10 billion Swiss francs ($10.8 billion) in deposits in a single day late last week – a measure of how much trust in the bank has waned, the Financial Times reported.

After a turbulent week for stocks that saw the SNB step in with a $54 billion lifeline, Credit Suisse was valued at just over $8.7 billion by Friday night – a huge move for a bank considered one of the world’s 30 major institutions. For a large bank, this is really too little.

FINMA and the SNB said Credit Suisse “complied with the capital and liquidity requirements imposed on such banks”, but distrust remained.

stock market crash

Shares in Credit Suisse tumbled more than 30% on Wednesday to hit a record low of 1.55 Swiss francs amid fears of contagion following the collapse of two US banks.

After paring some losses on Thursday, its shares closed down 8 percent at 1.86 Swiss francs on Friday as the Zurich-based bank struggled to keep investor confidence.

Credit Suisse has been dogged by a series of scandals in recent years. February 2021 share price CHF 12.78.

The bank has a net loss of $7.9 billion in 2022 and expects a “substantial” pre-tax loss this year.

The idea of ​​joining forces among Switzerland’s largest banks has been floated over the years but has been generally shot down due to competition concerns and risks to the stability of the Swiss financial system.

“Even if the authorities force Credit Suisse management to do so, they will only choose (this option) when there is no other solution,” said David Benamou, chief investment officer at Paris-based Axiom Alternative Investments.

(Aside from the title, this story is unedited by NDTV staff and published via a syndicated feed.)

Source link

Leave a Reply

Your email address will not be published. Required fields are marked *