UBS makes 930M takedown offer for Credit Suisse to save it from bankruptcy

UBS has offered 930 million euros -equivalent to 1,000 million dollars- to take over Credit Suisseaccording to the Financial Times. It is a takedown offer with which it would pay 0.25 Swiss francs per share, 83% below the 1.86 francs at which it closed last Friday.

The agreement between the two main Swiss banks It could be signed late this Sunday, as explained to the economic newspaper by four sources with direct knowledge of the situation of the operation. And in parallel, the Swiss authorities are working at a forced march to use emergency and exceptional measures, such as lightening the investor consultation period, and thus be able to complete the operation before the markets open on Monday.

UBS would have included an option to veto the operation if the entity’s CDS grows by more than 100 basis points. The situation is volatile and the terms of the operation may still change, according to sources familiar with the movements.

The terms of the agreement are being heavily influenced by the Swiss Central Bank and the regulator Finmawho are keen to see it close before the stock market opens on Monday.

What is Credit Suisse, how has it gone under and why should you care?

The Wall Street Journal. Caitlin McCabe

Credit Suisse took advantage of a liquidity lifeline from the Swiss National Bank this week worth more than $50 billion, after concerns about its prospects deepened. The move wasn’t enough to stem the stock’s slide of Credit Suisse or stem the outflow of bank deposits, forcing Switzerland’s central bank and top financial regulator to oversee talks with Credit Suisse’s biggest rival, UBS.

The end of the almost 167 years of Credit Suisse would mark one of the most significant moments in the banking world since the financial crisis of 2008. It would also underline the global dimension of the damage from a banking storm that began with the sudden collapse earlier this month of Silicon Valley Bank.

Credit Suisse, Silicon Valley Bank and the double standards with Banco Popular

Jorge Zuloaga

UBS has long been seen as part of any state-backed solution for Credit Suisse, which has a balance sheet about half the size of UBS’s $1.1 trillion in total assets. Any large-scale acquisition would give UBS lucrative businesses hitherto owned by Credit Suisse, such as client wealth management in Asia and the Middle East, but would also include less desirable units, such as the bank’s troubled investment bank. The purchase could also disrupt UBS’s current strategy and the perception of stability it has so far offered to investors. UBS has a market capitalization of about $65 billion, compared to $8 billion for Credit Suisse., according to FactSet. It made a net profit of $7.6 billion in 2022, while Credit Suisse posted a net loss of $7.9 billion.

both banks are considered to be of systemic importance in Switzerland and worldwideand their combination could be subject to additional supervision (from a competition point of view) and additional capital charges. Credit Suisse had about 50,000 employees. by the end of 2022, including more than 16,000 in Switzerland. It also has investment banking units in cities like New York, London and Singapore, an operations center near Raleigh, North Carolina, and employs thousands of people in technology in India and Poland. UBS has a workforce of about 74,000 employees Worldwide.

UBS has offered 930 million euros -equivalent to 1,000 million dollars- to take over Credit Suisseaccording to the Financial Times. It is a takedown offer with which it would pay 0.25 Swiss francs per share, 83% below the 1.86 francs at which it closed last Friday.