On Sunday, UBS agreed to take over rival bank Credit Suisse for just over EUR 3 billion.
The Swiss government forced the takeover to allay fears of a global banking crisis.
Here are the key winners and losers of the historic deal – from UBS itself to Credit Suisse’s AT1 bondholders.
Swiss bank UBS on Sunday agreed to acquire long-time rival Credit Suisse in a historic deal that will bring together two of Europe’s largest banks.
The Swiss government forced the takeover, valued at 3 billion francs (about 3.03 billion euros), after shares of Credit Suisse, listed on the Zurich Stock Exchange, plummeted 70 percent in a week. The collapse of Silicon Valley Bank Financial had fueled fears of a global banking crisis.
Here are the key winners and losers from the historic takeover.
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Loser: Credit Suisse
The 167-year-old Swiss bank is the biggest loser in Sunday’s bailout.
The global banking crisis that broke out last week weighed on Credit Suisse shares, which were already battered. It collapsed by 70 percent within five days.
Now the former banking giant has been forced by its own government to accept a takeover bid from its biggest competitor. It valued Credit Suisse at less than half its market capitalization as of Friday’s close. There has hardly been a deeper crash since the financial crisis of 2008.
Winner: UBS
The Zurich-based bank has acquired its longtime rival at a fraction of its market value. It can also rely on support from the government and the Swiss National Bank to absorb some of the losses from the takeover.
According to S&P Global, UBS’s assets under management will increase to nearly $2 trillion if the acquisition goes through. That’s more than the assets under management of U.S. competitors like Goldman Sachs and Morgan Stanley.
But times are still uncertain for European bank stocks. And that could take the shine off a potential deal, says an analyst.
“Under normal circumstances, I would say this is an absolutely fantastic deal for UBS,” Morningstar equity analyst Johann Scholtz said, according to the news outlet Reuters. “It’s a bit more complicated in the current environment as there is a lot of uncertainty in the markets in general.”
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Losers: Saudi Arabia, Qatar and Norway
Some of the world‘s largest investors are suffering this morning because of their ties to Credit Suisse.
The top shareholder, the Saudi National Bank, has lost about 1.1 billion euros in just 15 weeks, according to data from Bloomberg. Its president ruled out an increase in his stake on Wednesday, thereby contributing to the crash in the Swiss bank’s share price.
The Riyadh-based bank stocked up on Credit Suisse shares in November at a price of around €3.82 a share – a far cry from the roughly €0.76 that UBS is paying the Swiss bank’s shareholders as part of the takeover bid becomes.
Qatari and Norwegian sovereign wealth funds were other big investors in Credit Suisse. However, Norway’s Norges Bank Investment Management announced on Monday that it would Participation reduced earlier in the year have.
Winner: Wall Street (for now)
JP Morgan, Bank of America and the rest of Wall Street now have one less competitor. UBS boss Colm Kelleher announced on Sunday that there will be cuts at the Credit Suisse investment bank.
The bailout could also help contain some of the turmoil resulting from the ongoing global banking crisis. However, US investors are still worried about the Regionalbank First Republicwhose share price collapsed by 20 percent premarket on Monday.
Credit Suisse’s key role in the global financial system also meant that many deemed it “too big to fail.” Wall Street’s biggest banks could now be feeling the aftermath of Sunday’s takeover.
“It’s worse than the Silicon Valley bank collapse because Credit Suisse has an investment bank,” Dan Kemp, CIO of Morningstar Investment Management, told Business Insider last week. “She’s a bigger part of the banking system, so worrying about her health has always been a bigger concern.”
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Loser: AT1 bondholders
The Swiss regulator announced on Sunday that it will write down the value of about 16 billion euros in additional Tier 1 bonds from Credit Suisse to zero.
The little-known assets are special bonds that can be converted into shares if a bank’s overall financial stability falls below a certain level. They were introduced after the 2008 financial crisis.
Analysts have warned that the regulator’s move could weigh on other European banks looking to sell such bonds. This means that the deal between UBS and Credit Suisse could prolong rather than end the banking crisis.
“The Swiss financial regulator has ordered Credit Suisse AT1 bonds to be written down to zero. That appears to have spooked investors and prompted a sell-off in other bank debt, which weighed on stock prices,” AJ Bell Investment Director Russ Mold said Monday.
“It means that the banking crisis we’ve been witnessing in recent weeks has started a new chapter instead of reaching its end,” he added.
This article was translated from English by Stefanie Michallek. You can find the original here.