UBS acquires Credit Suisse. Get here all the information about Credit Suisse takeover here.
In a stunning move that shook the global banking industry, UBS announced on Sunday that it has agreed to buy its rival Credit Suisse for 3 billion Swiss francs ($3.2 billion) in an all-stock deal. The takeover, which was backed by the Swiss authorities, aims to prevent a collapse of Credit Suisse, which has been plagued by losses and scandals in recent years.
Credit Suisse takeover: What led to the takeover?
Credit Suisse has been struggling to recover from a series of setbacks that eroded its capital and reputation. In 2022, the bank reported a record loss of 7.3 billion Swiss francs ($7.9 billion) after taking massive writedowns on its exposure to Archegos Capital Management, a family office that imploded in March 2021 after failing to meet margin calls on its leveraged bets.
The bank also faced legal troubles over its involvement in the 1MDB corruption scandal, which resulted in criminal charges against several former executives and hefty fines from regulators around the world. In addition, Credit Suisse faced scrutiny over its role in facilitating loans to Greensill Capital, a supply chain finance firm that collapsed in March 2021 amid allegations of fraud and mismanagement.
The bank’s woes worsened last week when it was hit by a wave of deposit withdrawals and investor lawsuits following the collapse of several US banks that had close ties with Credit Suisse. The bank’s share price plunged by more than 50% in one week, raising fears of a liquidity crisis and systemic risk.
To prevent a bank run and ensure financial stability, the Swiss National Bank (SNB) stepped in to provide emergency funding to Credit Suisse and facilitated talks with UBS over a possible merger. The Swiss government also agreed to absorb up to 9 billion Swiss francs ($9.7 billion) in potential losses from certain assets held by Credit Suisse.
Credit Suisse takeover: What are the terms of the deal?
Under the terms of the deal, Credit Suisse shareholders will receive one UBS share for every 22.48 Credit Suisse shares they hold. This values Credit Suisse at 0.76 Swiss francs per share, well below its closing price of 1.86 Swiss francs on Friday.
The deal will create the world’s largest wealth manager with $5 trillion of invested assets under management, according to UBS. The combined bank will also have leading positions in investment banking, asset management, and private banking across Europe, Asia, and America.
UBS said it expects to achieve annual cost synergies of around 4 billion Swiss francs ($4.3 billion) by streamlining operations and cutting overlapping functions. The bank also said it plans to invest around 2 billion Swiss francs ($2.2 billion) over three years to accelerate its digital transformation and innovation capabilities.
UBS Chairman Colm Kelleher said: “This acquisition is attractive for UBS shareholders but let us be clear: as far as Credit Suisse is concerned this is an emergency rescue.” He added: “We have structured a transaction that will preserve the value left in
the business while limiting our downside exposure.”
What are the implications for Switzerland and beyond?
The takeover marks a historic moment for Switzerland’s banking sector, which has been dominated by UBS and Credit Suisse for decades. The two banks have competed fiercely for clients and talent both at home and abroad but have also faced challenges from stricter regulations, low-interest rates, and rising competition from fintech firms.
The takeover was supported by the Swiss authorities who saw it as necessary to protect Switzerland’s financial system and economy from further shocks amid an uncertain global environment.
Swiss President Alain Berset said: “The takeover of Credit Suisse by UBS is the best solution” in this situation.” He said: “The takeover was made possible after the Swiss federal government, the SNB, the FINMA, and other authorities agreed to support this solution.”
The SNB pledged a loan of up to 100 billion Swiss francs ($108 billion)to support the takeover. The SNB said it would provide liquidity assistance to UBS until the integration process is completed. The SNB also said it would monitor closely the impact of the deal on financial stability, money supply, and inflation.
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