UBS has agreed to buy Credit Suisse after raising its offer to more than $2 billion (1.86 billion euros), with Swiss authorities set to change the country’s laws to prevent a shareholder vote on the transaction as they rush to finalize a deal before Monday.
The agreement between the two largest banks in Switzerland will be signed this Sunday night after a few frantic last hours, in which Credit Suisse went so far as to reject a first offer of 1,000 million dollars from UBS, an amount that represents around 12% of its value.
Even from Switzerland, the possibility of taking over the bank in its entirety or maintaining a significant stake in the capital if an acquisition by UBS fails was considered due to the complexity of the operation and the short time frame set to reach an agreement, As reported Bloomberg.
In parallel, the Swiss authorities are working at a forced march to use emergency and exceptional measures, such as shortening the investor consultation period, and thus be able to complete the operation before the markets open on Monday. A liquidity line of 100,000 million is also being considered, which the Swiss National Bank would put on the table.
complexities
The acquisition of UBS presents multiple complexities. The financial entity is asking the Government to assume certain legal changes and possible future losses. The Swiss Finance Ministry has declined to comment.
For example, Swiss regulations require a six-week deadline to consult shareholders about an acquisition, so legislative changes are being considered to avoid this delay and facilitate the merger of the two main Swiss banks.
The entity sank 25% since the bankruptcy of SVB
Credit Suisse collapsed 8% on the stock market on Friday after experiencing a 24% drop on Wednesday, when it came to light that its main investor, the Saudi Arabian fund, refused the option of expanding positions in the capital to guarantee more liquidity in the face of an exodus of deposits. Since March 10, the day SVB’s liquidation was announced, the firm has fallen 25% and has fallen 74% in the last 12 months, afflicted by various crises.
Apart from the last stretch of panic in the banking sector, the different scandals that had occurred in the Swiss firm had led to a record deposit outflow in 2022 of 124.8 billion euros, 40% of the total, mainly due to a large flight of great fortunes. This situation left a hole in their accounts that resulted in losses of 7,400 million euros.
Therefore, the mistrust generated in this latest crisis arrives as the last link in a perfect storm. Proof of the massive exodus that surrounded the historic bank is in its funds, which, according to Morningstar data, would have already suffered net outflows of more than 200 million dollars in its vehicles in the United States and Europe alone. It remains to be seen if a merger will mean the end of this bleeding or if this will only be a full stop in the banking crisis.
