UBS is in talks to take over all or part of Credit Suisse, with the boards of Switzerland’s two biggest lenders set to meet separately at the weekend to consider what would be Europe’s most significant banking combination since the financial crisis, according to several people familiar with the matter. given an overview. talk.
The Swiss National Bank and regulator Finma are managing the negotiations in an effort to boost confidence in the country’s banking sector, the people said. The intervention comes days after the central bank was forced to provide a SFr50bn ($54bn) emergency credit line to Credit Suisse.
However, this failed to hold the slide in its share price, which has fallen to a record low after the largest investor ruled out of providing more capital and its chair admits that the exodus of wealth management clients has continued.
The share price performance of the Swiss lender has been very different in recent years. Over the past three years, UBS shares have gained about 120 percent, while their smaller rivals have fallen about 70 percent. The former has a market capitalization of $56.6bn, while Credit Suisse closed on Friday at $8bn.
By 2022, UBS will generate $7.6bn in revenue, while Credit Suisse will lose $7.9bn, effectively wiping out all of its previous decade’s earnings.
Swiss regulators told their US and UK counterparts on Friday afternoon that merging the two banks was “plan A” to arrest the collapse in investor confidence in Credit Suisse, one of the people said.
A few options beyond the full takeover in the negotiations, another person said, adding that both sides are trying to evaluate the regulatory barriers in different jurisdictions. This person added that UBS is also analyzing the potential risks of the deal.
The Swiss central bank wants lenders to agree on a simple and straightforward solution before markets open on Monday, one of the people said. There is no guarantee the deal, which must be approved by UBS shareholders, will be reached.
Credit Suisse and UBS declined to comment, as did the Swiss National Bank, the Federal Reserve and the Bank of England.
The full merger will create one of Europe’s largest global systemic financial institutions. UBS has $1.1tn of total assets on its balance sheet and Credit Suisse has $575bn.
However, such a big deal may not work out. The Financial Times has previously reported that other options under consideration include breaking up Credit Suisse and raising funds through a public offering of its ringfenced Swiss division, with wealth and asset management units sold to UBS or other bidders.
UBS has been on high alert for an emergency rescue call from the Swiss government after investors became wary of Credit Suisse’s latest restructuring. Last year, chief executive Ulrich Körner announced plans to cut 9,000 jobs and spin off much of the investment bank into a new entity called First Boston, run by former board member Michael Klein.
A potential takeover by its biggest rival would cap nearly three years of scandal and chaos at 167-year-old Credit Suisse. The twin crises linked to specialist finance group Greensill Capital and family office Archegos – both of which collapsed within weeks of 2021 – led to billions of dollars in losses.
The lender was also fined for its role in Mozambique’s $2bn “tuna bond” scandal and was the first Swiss bank to be found guilty of corporate crime after it was found to have laundered money for a Bulgarian cocaine cartel run by ex-professionals. wrestler.
Meanwhile, Credit Suisse is experiencing significant management turnover. Former chief executive Tidjane Thiam resigned in 2020 after a spying scandal and a neighborhood dispute with Zurich’s scandal-ridden subordinates.
A year later, António Horta-Osório was appointed as chair. The former Lloyds Bank boss was brought in to clean up the Swiss lender’s culture. He was forced out in early 2022 due to excessive use of his company jet and breach of Covid-19 quarantine rules to watch the European Football Championship final and the men’s Wimbledon tennis final on the same day.
Additional reporting by Robert Smith