The Swiss government wanted an immediate solution to the Credit Suisse banking crisis and has achieved it in record time. The country’s leading bank, UBS, has bought its biggest competitor for 3,000 million euros, an almost symbolic price that is only close to a third of the stock market value of the entity still chaired by Axel Lehman. With this agreement, Credit Suisse shares have been valued at 0.76 Swiss francs, 40% of their closing price last Friday on the Zurich Stock Exchange.
Thus, a complex operation was closed in record time, encouraged by the Swiss authorities, who wanted to close the operation immediately, despite the reluctance of UBS, which had doubts about the legal basis of the operation and wanted to ensure that it was kept out of possible claims. and regulatory interventions. The main Swiss bank submitted an initial offer of $1 billion, which was rejected as too low and detrimental to Credit Suisse shareholders. Finally, he doubled the offer to achieve a preliminary three-way agreement between the Government and the two entities.
In the middle of the afternoon, the Minister of Finance, Karin Keller-Sutter, confirmed at a press conference that the Swiss Confederation will grant a guarantee equivalent to more than 9,000 million euros to reduce the risks that the UBS bank incurs when absorbing Credit Suisse . This guarantee will work “like insurance” and will cover any “very specific” losses of Credit Suisse and only if these losses exceed a threshold that the minister did not specify. Keller-Sutter indicated that the bankruptcy of Credit Suisse “would have had irreparable consequences” not only for Switzerland, but for banks in the rest of the world and that, for this reason, “we assume responsibilities that go beyond our own borders”.
Doubts had arisen from the Swiss Financial Market Supervisory Authority (Finma), which had objected to the merger of both entities due to incompatibility with national competition regulations, given the dominant position of both in the Swiss banking sector. For this reason, UBS was studying in detail all the repercussions of the operation. A procedure that will no longer delay the acquisition, after being officially confirmed and after the buyer receives the guarantee from the Swiss Government that the purchase of his rival will not cause him legal problems, losses or claims.
Despite the fact that the Executive seems to be breathing calmly, the operation still presents enormous complexity, since the operation had to be closed before the opening of the Asian markets, which began late in the afternoon in Europe, to avoid a new price collapse . In addition, financial experts recall that Swiss regulations require a six-week period to consult shareholders about an acquisition, so express legislative changes are being considered to avoid this delay and facilitate the merger.
Although not many details of the deal have been leaked, Swiss financial sources are considering the possibility of UBS doing a complete restructuring of the entity and taking over its rival’s wealth and asset management activities, while selling the banking business. The Swiss economic agency AWP affirmed that both the Swiss National Bank (SNB) and Finma admit that the purchase of Credit Suisse by UBS was the only solution to avoid the collapse of the bank of the two candles.
Thus ends a week at Credit Suisse, involved in serious financial and confidence problems, in which it sank more than 30% on the Zurich stock market last Wednesday, to close that session with -24%, after that its main shareholder since 2022, the Saudi National Bank, ensured that it was not going to invest more in the Swiss entity to clean up its battered accounts. To calm the market, the Swiss National Bank announced hours after that stock market crash a loan of 50,000 million francs (50,500 million euros), which allowed the entity to recover 19% on the Zurich Stock Exchange on Thursday, but on Friday shareholder doubts returned and shares fell again 8%.
Credit Suisse, founded in 1856, has chained two years of millionaire losses: in 2021 they were 1,572 million Swiss francs (1,600 million euros), and in 2022 they almost quintupled, to 7,293 million francs (7,400 million euros). Among the main factors that explain these lousy accounts are investor mistrust, scandals and loss of prestige, as well as overexposure to risk firms that have already collapsed.