UBS bank in the running to buy Credit Suisse and avoid a debacle
A deal could be reached as early as Saturday night.
Switzerland's largest bank, UBS, is in advanced negotiations to buy its rival Credit Suisse and to avoid a debacle, several media said on Saturday, in an attempt to reassure investors and avoid panic in the markets. Monday.
According to the daily Financial Times which, as of Friday evening, had affirmed that UBS was in the running for the takeover of Credit Suisse under pressure from the authorities Swiss regulators, an agreement could be reached as early as Saturday evening.
The government met on Saturday afternoon to discuss the situation of Credit Suisse, reports the national agency Keystone-ATS. According to the daily NZZ, the seven members of the Federal Council met for two hours.
The Swiss market must open at 8 a.m. on Monday and a viable solution must be found by then for this bank perceived as a weak link in the sector, at the risk otherwise of experiencing an even darker day than Wednesday, March 15.
At the close of trading, Credit Suisse was then worth barely 7 billion Swiss francs (about as many euros, or C$10.45 billion), a pittance for a bank that is part – just like UBS – of the 30 institutions worldwide deemed too big to fail.
Given the risks to the financial system, the eyes of the world are on Zurich, where negotiations take place.
“We now await a definitive and structural solution to the problems of this bank. »
— Bruno Le Maire, Minister of the Economy of France, in an interview with the daily newspaper Le Parisien
According to the Financial Times, citing two unnamed sources, Credit Suisse customers withdrew 10 billion Swiss francs in deposits in a single day at the end of last week in the face of fears that this bank is now raising.
According to Bloomberg, citing unnamed sources, UBS is demanding that the public authorities bear legal costs and potential losses.
Discussions stumble over the bank of investment, indicates the financial agency, one of the scenarios being studied being a takeover only of asset and wealth management with a sale of investment banking.
Discussions also focus on the fate of the Swiss division of Credit Suisse, one of the profitable parts of the group, which lost 7.3 billion Swiss francs last year and which forecasts substantial losses in 2023.< /p>
This division brings together retail banking and loans to SMEs. One of the avenues considered by analysts is that of an IPO, which would also avoid massive layoffs in Switzerland due to duplication with UBS's activities.
On Wednesday, the distrust of investors and partners prompted the Swiss Central Bank to lend 50 billion Swiss francs to breathe new life into Credit Suisse and to reassure the markets. The respite, however, was short-lived.
Buying the bank would not be expensive today, but an acquisition of this size is dauntingly complex, especially when done in a hurry.
Credit Suisse has just experienced two years marked by several scandals which revealed, by management's own admission, substantial weaknesses in its internal control. The Swiss Financial Market Supervisory Authority (FINMA) accused him of having seriously failed in his prudential obligations in the bankruptcy of the financial company Greensill, which marked the beginning of his troubles.
By contrast, UBS, which spent several years recovering from the shock of the 2008 financial crisis, is beginning to reap the rewards of its efforts.
The Competition Commission may also raise eyebrows depending on the configuration of the takeover.
At the end of last October, Credit Suisse had unveiled a vast restructuring plan which provided for the elimination of 9,000 job positions. by 2025, more than 17% of its workforce.
The bank, which employed 52,000 people at the time, plans to separate the merchant bank from the rest of its activities to refocus on its most stable areas, including wealth management.
However, Morningstar analysts consider the restructuring too complex and not thorough enough.
< p class="e-p">Analysts at US bank J.P. Morgan are considering a drastic option: for Credit Suisse to completely shut down its investment banking business ment.