Thursday, November 2, 2023

UBS’s Possible Takeover of Credit Suisse: Key Info


Credit Suisse, a Switzerland-based multinational investment bank, has found itself caught in the turmoil caused by the collapse of US lenders Silicon Valley Bank and Signature Bank over the past week. The 167-year-old organisation is the most globally significant bank affected by the crisis of confidence. As a result, UBS, another Swiss-based bank, has reportedly asked the Swiss government to cover around $6bn in costs if it were to buy Credit Suisse. The guarantees UBS is seeking would cover the cost of winding down parts of Credit Suisse and potential litigation charges.

UBS is under pressure from Swiss authorities to take over its local rival to get the crisis under control. The plan could see Credit Suisse’s Swiss business spun off. However, talks are encountering significant obstacles, and 10,000 jobs may have to be cut if the two banks merge. Switzerland is preparing to use emergency measures to fast-track the deal, and US authorities are working with their Swiss counterparts to help broker a deal.

According to Swiss newspaper Blick, UBS will buy Credit Suisse in a deal to be sealed on Sunday during an exceptional meeting in Bern, bringing together the Swiss government and the banks’ executives. There were multiple reports of interest in Credit Suisse from other rivals as well. Bloomberg reported that Deutsche Bank was considering buying some of its assets.

Credit Suisse shares lost a quarter of their value in the last week. The bank was forced to tap $54bn in central bank funding as it tries to recover from a string of scandals that undermined the confidence of investors and clients. Credit Suisse has been plagued by a series of scandals in recent years, and its shares were worth 12.78 Swiss francs ($13.84) in February 2021. In 2022, the bank suffered a net loss of $7.9bn and expects a “substantial” pre-tax loss this year.

Credit Suisse ranks among the world’s largest wealth managers and is one of 30 global systemically important banks, whose failure would cause ripples through the entire financial system. It has local wealth management, investment banking, a local Swiss bank, and asset management operations. It has just over 50,000 employees and 1.3 trillion Swiss francs ($1.4 trillion) in assets under management at the end of 2022, down from 1.6 trillion a year earlier. With more than 150 offices in about 50 countries, Credit Suisse is the private bank for a large number of wealthy clients, both individuals and companies.

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