Bank takeover

UBS agrees $3bn deal to acquire Credit Suisse

Credit Suisse
Credit Suisse will merger with UBS

UBS is buying its rival Swiss bank Credit Suisse after increasing its offer to more than $3.1 billion (£2.6bn).

It will pay just 0.50 francs a share in its own stock, well below Credit Suisse’s closing price of 1.86 francs on Friday, in a deal that raises uncertainty over thousands of jobs in London and elsewhere.

The Swiss National Bank also agreed to offer a $100 billion liquidity line to loss-making Credit Suisse as part of the deal which followed meetings in Bern to secure the future of Credit Suisse.

Credit Suisse has trading desks in key cities around the world, serving clients through its wealth management business and is a major adviser in mergers and acquisitions.

It is the second largest Swiss bank with around 50,480 employees, with a heavy presence in London.

UBS has more than 74,000 employees working in nearly 50 countries, including a small team in wealth management in Edinburgh.

Swiss Finance Minister Karin Keller-Sutter said: “The bankruptcy of a globally systematically important bank would have caused irreparable economic turmoil in Switzerland and throughout the world.

“For this reason, Switzerland had to take the responsibilities beyond its own borders.

“These efforts have paid off. The federal council is convinced that UBS’ takeover of Credit Suisse has laid the foundations for greater stability both in Switzerland and internationally.”

The Bank of England issued a statement offering reassurance that the UK banking system was well funded.

It said it welcomed the “comprehensive set of actions set out by the Swiss authorities today in order to support financial stability”.

It added: “We have been engaging closely with international counterparts throughout the preparations for today’s announcements and will continue to support their implementation. The UK banking system is well capitalised and funded, and remains safe and sound.”

A merger of this scale would usually take months to complete but regulators and other authorities were keen to get the deal in place before equity markets reopen on Monday following a week of turmoil in the banking sector.

Credit Suisse’s share price closed on Friday at 1.86 Swiss francs, with the bank worth just over $8.7billion, after the collapse of two US banks. On Wednesday its share price plunged by more than 30% which saw the Swiss central bank step in with a 54bn francs lifeline.

Wider issues in the banking sector or the global economy are not to blame for Credit Suisse’s problems. It has been struck low by investor concerns over the accuracy of its financial reporting as well as a string of scandals including money laundering.

Things came to a head last week when the Saudi National Bank – Credit Suisse’s top shareholder – said it would no longer buy shares due to regulatory issues.

Ironically, Credit Suisse cruised through the 2008-09 crisis without requiring government assistance, while UBS had to find support.

Swiss President Alain Berset said today’s acquisition by UBS was the best way of restoring confidence in the financial system. 

ECB President Christine Lagarde credited the regulation put in place after the crisis for putting in place the process for fending off another. She said the banks “are in a completely different position from 2008”.

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