“UBS has made the deal of a lifetime. Never in history has a bank increased its NAV by 70% overnight.” Thus expressed Davide Serra, founder and CEO of Algebris Investments, in commenting on the agreement for the acquisition of Credit Suisse. “This will be very positive for all UBS stakeholders.”
As regards the cancellation of the AT1 bonds, “FINMA certainly surprised with the change in the law made overnight and with the reversal of the seniority of the capital structure. This never happened and is clearly a very unfortunate political mistake.”
In this sense, “this morning’s statement by the ECB, which has always respected the capital structure of EU banks, provides an important clarification. We don’t think there will be a long-term structural impact on AT1s in Europe, outside of Switzerland. These are G20 capital structures that exist all over the world. These loss-absorbing bonds are part of the bank debt fabric and will remain so in Europe and the United States with Basel III,” concludes Serra.