UBS will buy Credit Suisse and the deal will be sealed on Sunday during an extraordinary meeting of the government and the leaders of the two banking giants in Bern, the tabloid said on Saturday. Blickgenerally knowledgeable.
A merger of the country’s two largest banks, one of which is attracting growing investor suspicion, is a complex affair that normally could take months. UBS will have had a few days.
But the Swiss authorities have no choice but to push UBS to overcome its reluctance, due to the enormous pressure exerted by Switzerland’s major economic and financial partners who fear for their own financial center, says Blick.
The US Treasury had also indicated that it was following the case closely.
The Swiss market should open at 8 a.m. on Monday and a viable solution must be found by then for this bank perceived as a weak link in the sector, at the risk otherwise of experiencing an even darker day than Wednesday, March 15.
At the close of trading, Crédit Suisse was then worth barely 7 billion Swiss francs (about as many euros, or CA$10.45 billion), a pittance for a bank which is part – like UBS – of the 30 institutions around the world deemed too big to fail.
But according to the Financial Times et Blick, the bank’s customers withdrew 10 billion Swiss francs in deposits in a single day late last week. A tangible sign of distrust of the establishment.
Given the risks to the financial system, the eyes of the whole world are fixed on Zurich, where the negotiations are taking place.
« We are now awaiting a definitive and structural solution to the problems of this bank. »
Talks hang over investment banking
According to the Bloomberg agency, which cites anonymous sources, UBS is demanding that the public authorities bear legal costs and potential losses.
The discussions stumble on the investment bank, indicates the financial agency, one of the scenarios under study being a takeover only of asset and wealth management with a sale of the investment bank.
Discussions also focus on the fate of the Swiss division of Credit Suisse, one of the profitable parts of the group, which lost 7.3 billion Swiss francs last year and which forecasts losses substantial
in 2023.
This division brings together retail banking and loans to PME. One of the avenues considered by analysts is that of an IPO, which would also avoid massive layoffs in Switzerland because of duplication with UBS’s activities.
On Wednesday, the distrust of investors and partners prompted the Swiss Central Bank to lend 50 billion Swiss francs to breathe new life into Credit Suisse and to reassure the markets. However, the respite was only short-lived.
Buying the bank would not be expensive today, but an acquisition of this size is of formidable complexity, especially when it is done in a hurry.
Credit Suisse has just had two years marked by several scandals which revealed, by management’s own admission, substantial weaknesses
in his internal control
. The Swiss Financial Market Supervisory Authority (FINMA) accused him of having seriously breached its prudential obligations
in the bankruptcy of the financial company Greensill, which marked the beginning of his troubles.
By contrast, UBS, which spent several years recovering from the shock of the 2008 financial crisis, is beginning to reap the rewards of its efforts.
The Competition Commission could also raise eyebrows depending on the configuration of the takeover.
At the end of last October, Credit Suisse unveiled a vast restructuring plan which provided for the elimination of 9,000 positions by 2025, or more than 17% of its workforce.
The bank, which employed 52,000 people at the time, plans to separate investment banking from the rest of its activities to refocus on its most stable areas, including wealth management.
However, Morningstar analysts consider the restructuring too complex
and not pushed enough.
Analysts at the American bank JP Morgan are considering a radical option: that Credit Suisse closes completely
its investment banking business.