Howdy, Stranger!

It looks like you're new here. If you want to get involved, click one of these buttons!

In this Discussion

Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.

    Support MFO

  • Donate through PayPal

UBS Agrees to Buy Credit Suisse for More Than $3 Billion

UBS Group AG agreed to take over its longtime rival Credit Suisse Group AG for more than $3 billion, pushed into the biggest banking deal in years by regulators eager to halt a dangerous decline in confidence in the global banking system. The deal between the twin pillars of Swiss finance is the first megamerger of systemically important global banks since the 2008 financial crisis when institutions across the banking landscape were carved up and matched with rivals, often at the behest of regulators.

The Swiss government said it would provide more than $9 billion to backstop some losses that UBS may incur by taking over Credit Suisse. The Swiss National Bank also provided more than $100 billion of liquidity to UBS to help facilitate the deal.

Swiss authorities were under pressure to make the deal happen before Asian markets opened for the week. The urgency on the part of regulators was prompted by an increasingly dire outlook at Credit Suisse, according to one of the people familiar with the matter. The bank faced as much as $10 billion in customer outflows a day last week, this person said.

The sudden collapse of Silicon Valley Bank earlier this month prompted investors globally to scour for weak spots in the financial system. Credit Suisse was already first on many lists of troubled institutions, weakened by years of self-inflicted scandals and trading losses. Swiss officials, along with regulators in the U.S., U.K. and European Union, who all oversee parts of the bank, feared it would become insolvent this week if not dealt with, and they were concerned crumbling confidence could spread to other banks.

An end to Credit Suisse’s nearly 167-year run marks one of the most significant moments in the banking world since the last financial crisis. It also represents a new global dimension of damage from a banking storm started with the sudden collapse of Silicon Valley Bank earlier this month.

Unlike Silicon Valley Bank, whose business was concentrated in a single geographic area and industry, Credit Suisse is a global player despite recent efforts to reduce its sprawl and curb riskier activities such as lending to hedge funds.

Credit Suisse had a half-trillion-dollar balance sheet and around 50,000 employees at the end of 2022, including more than 16,000 in Switzerland.

UBS has around 74,000 employees globally. It has a balance sheet roughly twice as large, at $1.1 trillion in total assets. After swallowing Credit Suisse, UBS’s balance sheet will rival Goldman Sachs Group Inc. and Deutsche Bank AG in asset size.
The above is excerpted from a current article in The Wall Street Journal, and was edited for brevity.

Comments

  • edited March 2023
    Heard as low as ONE billion (not sure which currency) was offered by UBS. This Credit Sussie debacle is actually bigger issue on global level of financial contagion. The Swiss government already made billions line of credit available.

    ++++
    During the hay days, Credit Sussie Bank is the second largest Swiss bank widely held in many mutual funds. It was worth many bullions in asset. Something went terrible wrong in recent years that led to their demise.
  • edited March 2023
    Feels more like a shotgun marriage done at fire-sale prices, like what JPM paid for Bear Stearns back in '08 ... though not quite at prices comparable to a hot-dog as it would've been at $1B.
  • edited March 2023
    Credit Suisse Importance

    "The bank ranks among the world's largest wealth managers and crucially it is one of 30 global systemically important banks, whose failure would cause ripples through the entire financial system."

    "Credit Suisse has a local Swiss bank, wealth management, investment banking and asset management operations. It has just over 50,000 employees and 1.3 trillion Swiss francs in assets under management at the end of 2022, down from 1.6 trillion a year earlier."

    "With more than 150 offices in around 50 countries, Credit Suisse is the private bank for a large number of entrepreneurs, rich and ultra rich individuals and companies."
    Link
  • I wonder if this means anything for their funds.
  • edited March 2023
    Not a large stable of U.S.-sold funds at either company, but they may have many more for European investors. I would expect some of the funds will merge or liquidate and there will be manager and strategy shifts.: https://am.credit-suisse.com/us/en/asset-management/investment-solutions/funds.html

    https://ubs.com/us/en/asset-management/individual-investors-and-financial-advisors/products/mutual-fund.html
  • I wonder if this means anything for their funds.

    Good question.
    Credit Suisse offers a suite of Exchange Traded Notes (ETNs).
    Link

    "An ETN is an unsecured debt security issued by a bank, unlike an ETF which holds assets such as stocks, commodities, or currencies which are the basis of the price of the ETF.
    The return of an ETN is linked to a market index or other benchmark."


    "An ETN promises to pay at maturity, the full value of the index, minus the management fee.
    Like any other debt security, the investor is subject to the credit risk of the bank issuer."

    Link


  • "has agreed"... (as in "an offer that cannot be refused")
    Credit Suisse, the battered Swiss banking giant, has agreed to a takeover by Switzerland’s largest bank, UBS — a move aimed at staving off immediate concerns of a disorderly bankruptcy and stemming panic about global financial turmoil.

    UBS has agreed to buy Credit Suisse in an emergency deal that ties up two of Europe’s largest banks, Swiss authorities announced Sunday.

    Swiss authorities are planning to speed up the process by circumventing laws that would require a shareholder vote, the Financial Times reported earlier Sunday. The Financial Times also reported that the value of the all-share deal was more than $2 billion, but that figure was not officially confirmed by the Swiss authorities.

    A “swift and stabilizing solution was absolutely necessary,” Alain Berset, president of the Swiss Confederation, said in a Sunday afternoon news conference. The UBS deal, he said, was “the best solution for restoring the confidence that has been lacking in financial markets recently.”

    In a joint statement Sunday afternoon, Treasury Secretary Janet L. Yellen and Federal Reserve Chair Jerome H. Powell said that they “welcome” the announcement.

    “The capital and liquidity positions of the U.S. banking system are strong, and the U.S. financial system is resilient,” Yellen and Powell wrote. “We have been in close contact with our international counterparts to support their implementation.”

    Credit Suisse and UBS did not immediately respond to requests for comment.

    The takeover caps more than a week of speculation over the Swiss giant’s fate amid growing fears of a global financial crisis, after two U.S. regional banks suddenly failed earlier this month. Although U.S. regulators have taken sweeping steps, including backstopping deposits at Silicon Valley Bank and Signature Bank of New York, those measures have done little to assuage fears of a cascading banking crisis.

    Those concerns went global this week, after Credit Suisse warned of “material weaknesses” in its financial reporting. On Thursday, the bank received $53.7 billion in emergency funds from Switzerland’s central bank, but it wasn’t enough to restore confidence in the bank’s viability. Shares of Credit Suisse have tumbled more than 20 percent in the past week, and more than 35 percent this year.

    The past week has raised new questions on what it will take to avert another crisis. On Sunday, Sen. Elizabeth Warren (D-Mass.) called on Congress to lift the federal insurance cap for bank deposits above $250,000. She also urged lawmakers to repeal a provision of the 2018 law that had loosened restrictions on banks with $50 billion or more in assets, saying the latest tumult in the financial system underscored her belief that the Fed has fallen short on its core duties.
    The above is a complete and unedited transcript of a current article in The Washington Post.
  • @LewisBraham, when Dutch giant ING got into trouble during the GFC 2008-09 and had to be rescued by the Dutch government, one condition was to refocus on core businesses. It ended up divesting its US operations (noncore):

    ING insurance and asset management businesses (US) went to Yoya Financial/VOYA.

    ING Direct (US online bank, that itself had origin in the failed online NetBank in GA) went to Capital One/COF. Unluckily or luckily, I stayed through all these transitions after my early find years ago that NetBank offered FREE wire transfers - that didn't last long!

    We don't know all details of the UBS takeover of CS, but there may be similar conditions by the government or by UBS. CS in the US already had a lot of controversial M&A history - First Boston, Warburg Pincus (asset management unit), Donaldson Lufkin Jenerette.
    https://en.wikipedia.org/wiki/Credit_Suisse
  • @Yogibearbull That sounds plausible. Would both divest here or just Credit Suisse? I would think just CS as it is the one that received government assistance.
  • Definitely big news, the CS deal - the BBG Surveillance team is already doing a live special airing now, and the Asian markets aren't even open yet.
  • interesting political question on BBG right now: was this deal structured in a way to try and protect certain foreign shareholders (ie, Saudi Arabia and other Gulf nations) who bought stock in CS just a little while ago during its last credit raise?
Sign In or Register to comment.