• Investing
  • Stock
Round Table Thoughts
  • Economy
  • Editor’s Pick
Home Editor's Pick UBS buys Credit Suisse for $3.2 billion as regulators look to shore up the global banking system
Editor's Pick

UBS buys Credit Suisse for $3.2 billion as regulators look to shore up the global banking system

by March 20, 2023
by March 20, 2023 0 comment
Share
0
FacebookTwitterPinterestWhatsapp

UBS agreed to buy its embattled rival Credit Suisse for 3 billion Swiss francs ($3.2 billion) Sunday, with Swiss regulators playing a key part in the deal as governments looked to stem a contagion threatening the global banking system.

“With the takeover of Credit Suisse by UBS, a solution has been found to secure financial stability and protect the Swiss economy in this exceptional situation,” read a statement from the Swiss National Bank, which noted the central bank worked with the Swiss government and the Swiss Financial Market Supervisory Authority to bring about the combination of the country’s two largest banks.

Credit Suisse’s headquarters in Zurich on Sunday.Michael Buholzer / Keystone via AP

The terms of the deal will see Credit Suisse shareholders receive 1 UBS share for every 22.48 Credit Suisse shares they hold.

“This acquisition is attractive for UBS shareholders but, let us be clear, as far as Credit Suisse is concerned, this is an emergency rescue. We have structured a transaction which will preserve the value left in the business while limiting our downside exposure,” said UBS Chairman Colm Kelleher in a statement.

The combined bank will have $5 trillion of invested assets, according to UBS.

“We are committed to making this deal a great success. There are no options in this,” Kelleher said when asked during the press conference if the bank could back out of the deal. “This is absolutely essential to the financial structure of Switzerland and … to global finance.”

The Swiss National Bank pledged a loan of up to 100 billion Swiss francs ($108 billion) to support the takeover. The Swiss government also granted a guarantee to assume losses up to 9 billion Swiss francs from certain assets over a preset threshold “in order to reduce any risks for UBS,” said a separate government statement.

“This is a commercial solution and not a bailout,” said Karin Keller-Sutter, the Swiss finance minister, in a press conference Sunday.

The UBS deal was scrambled together before markets reopened for trading Monday after Credit Suisse shares logged their worst weekly decline since the onset of the coronavirus pandemic. The losses came despite a new loan of up to 50 billion Swiss francs ($54 billion) granted from the Swiss central bank last week, in an effort to halt the slide and restore confidence in the bank.

News of the deal was welcomed by Treasury Secretary Janet Yellen and Federal Reserve Chair Jerome Powell in a statement. “The capital and liquidity positions of the U.S. banking system are strong, and the U.S. financial system is resilient. We have been in close contact with our international counterparts to support their implementation,” they said.

Credit Suisse had already been battling a string of losses and scandals, and in the last two weeks, sentiment was rocked again as banks in the U.S. reeled from the collapse of Silicon Valley Bank and Signature Bank.

U.S. regulators’ backstop of uninsured deposits in the failed banks and the creation of a new funding facility for troubled financial institutions failed to stem the shock and is threatening to envelop more banks both in the U.S. and abroad.

Credit Suisse Chairman Axel Lehmann said in the press conference that the financial instability brought about by the collapsed U.S. regional banks hit the bank at the wrong time.

Despite regulators’ involvement in the pairing, the deal gives UBS autonomy to run the acquired assets as it sees fit, which could mean significant job cuts, sources told CNBC’s David Faber.

Credit Suisse’s scale and potential impact on the global economy is much greater than U.S. regional banks, which pressured Swiss regulators to find a way to bring the country’s two largest financial institutions together. Credit Suisse’s balance sheet is around twice the size of Lehman Brothers’ when it collapsed, at around 530 billion Swiss francs at the end of 2022. It is also far more globally interconnected, with multiple international subsidiaries — making an orderly management of Credit Suisse’s situation even more important.

Bringing the two rivals together was not without its struggles, but pressure to stave off a systemic crisis won out in the end. UBS initially offered to buy Credit Suisse for around $1 billion Sunday, according to multiple media reports. Credit Suisse reportedly balked at the offer, arguing it was too low and would hurt shareholders and employees, people with knowledge of the matter told Bloomberg. 

By Sunday afternoon, UBS was in talks to buy the bank for “substantially” more than 1 billion Swiss francs, sources told CNBC’s Faber. He said the price of the deal increased throughout the day’s negotiations. 

Credit Suisse lost around 38% of its deposits in the fourth quarter of 2022 and revealed in its delayed annual report early last week that outflows have still yet to reverse. It reported a full-year net loss of 7.3 billion Swiss francs for 2022 and expects a further “substantial” loss in 2023.

The bank had previously announced a massive strategic overhaul in a bid to address these chronic issues, with current CEO and Credit Suisse veteran Ulrich Koerner taking over in July.

This post appeared first on NBC NEWS
You Might Also Like
  • UPS workers overwhelmingly approve new contract, ending strike threat
  • Lara Trump to host weekend show on Fox News
  • Collapsed crypto exchange Mt. Gox is about to unload $9 billion of coins
  • Some TurboTax users will soon be getting settlement checks
Share
0
FacebookTwitterPinterestWhatsapp

previous post
The Fed Needs to Act Soon; Stocks Slip Below Key Support
next post
The Halftime Show: Is Tech Becoming a Safe Haven?

You may also like

Wall Street rides to the rescue as 11 banks pledge...

March 17, 2023

Southwest Airlines pauses corporate hiring, most summer internships to cut...

January 15, 2025

Tiger Woods unveils new lifestyle brand and clothing line after...

February 14, 2024

American Airlines flight attendants ratify new contract with immediate raises...

September 13, 2024

Can Starbucks fix long lines at its airport cafes?

November 25, 2024

Intel used to dominate the U.S. chip industry. Now it’s...

April 30, 2024

Trump Media director accused of ‘hacking’ files in attempted corporate...

April 13, 2024

Restaurants are rebounding — but Starbucks and McDonald’s still have...

January 29, 2025

FTC opens broad antitrust investigation into Microsoft

November 29, 2024

Potential UAW strike: Where labor talks stand and what’s at...

September 9, 2023

    Stay updated with the latest news, exclusive offers, and special promotions. Sign up now and be the first to know! As a member, you'll receive curated content, insider tips, and invitations to exclusive events. Don't miss out on being part of something special.


    By opting in you agree to receive emails from us and our affiliates. Your information is secure and your privacy is protected.

    Recent Posts

    • Krispy Kreme stock plunges after doughnut chain pauses McDonald’s rollout, pulls outlook

      May 8, 2025
    • Don’t Buy Robinhood Stock… Until You See This Chart Setup

      May 8, 2025
    • UnitedHealthcare sued by shareholders over reaction to CEO’s killing

      May 8, 2025
    • The Unpredictable Stock Market: How to Make Sense of It

      May 8, 2025
    • AMD CEO calls China a ‘large opportunity’ and warns against strict U.S. chip controls

      May 7, 2025

    Popular Posts

    • 1

      Trump-era China sanctions ended by Biden may be...

      June 27, 2024 2,632 views
    • 2

      Walz’s honeymoon with China gets fresh scrutiny as...

      August 9, 2024 2,339 views
    • 3

      Biden appointee played key role in recruiting Chinese...

      June 25, 2024 2,320 views
    • 4

      Shein’s global ambitions leaves some cybersecurity experts fearful...

      July 10, 2024 2,302 views
    • 5

      Harris VP pick spent years promoting research facility...

      August 29, 2024 2,186 views

    Categories

    • Economy (7,009)
    • Editor's Pick (2,066)
    • Investing (538)
    • Stock (2,530)

    Popular Posts

    • 1

      Trump-era China sanctions ended by Biden may be revived under new House GOP bill

      June 27, 2024
    • 2

      Walz’s honeymoon with China gets fresh scrutiny as Harris camp blasts ‘lying’ critics

      August 9, 2024
    • 3

      Biden appointee played key role in recruiting Chinese businesses to Delaware: ‘Longtime friends’

      June 25, 2024
    • 4

      Shein’s global ambitions leaves some cybersecurity experts fearful of Chinese spy threats

      July 10, 2024
    • 5

      Harris VP pick spent years promoting research facility that collaborated with ‘Chinese military company’

      August 29, 2024

    Latest News

    • Krispy Kreme stock plunges after doughnut chain pauses McDonald’s rollout,...

      May 8, 2025
    • Don’t Buy Robinhood Stock… Until You See This Chart Setup

      May 8, 2025
    • UnitedHealthcare sued by shareholders over reaction to CEO’s killing

      May 8, 2025

    Categories

    • Economy (7,009)
    • Editor's Pick (2,066)
    • Investing (538)
    • Stock (2,530)

    Disclaimer: RoundTableThoughts.com, its managers, its employees, and assigns (collectively “The Company”) do not make any guarantee or warranty about what is advertised above. Information provided by this website is for research purposes only and should not be considered as personalized financial advice. The Company is not affiliated with, nor does it receive compensation from, any specific security. The Company is not registered or licensed by any governing body in any jurisdiction to give investing advice or provide investment recommendation. Any investments recommended here should be taken into consideration only after consulting with your investment advisor and after reviewing the prospectus or financial statements of the company.

    Copyright © 2024 RoundTableThoughts.com. All Rights Reserved.

    Round Table Thoughts
    • Investing
    • Stock
    Round Table Thoughts
    • Economy
    • Editor’s Pick

    Read alsox

    July home sales break a four-month...

    August 23, 2024

    Donald Trump set to receive $1.25...

    April 23, 2024

    The collapse of a fintech firm...

    May 23, 2024
    Sign In

    Keep me signed in until I sign out

    Forgot your password?

    Password Recovery

    A new password will be emailed to you.

    Have received a new password? Login here