Home » UBS buys Credit Suisse for 3 billion francs: the details

UBS buys Credit Suisse for 3 billion francs: the details

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UBS buys Credit Suisse for 3 billion francs: the details

Ubs buys Credit Suisse

At the end of a weekend of close negotiations, the agreement arrives that makes European and American institutions and large banks breathe a sigh of relief: Ubs purchase Swiss credit for 3 billion francs. A deal reached only on Sunday evening and at a price, overall, at a strong discount compared to the closing of the markets on Friday.

This is a first step in trying to end the crisis on stock markets around the world that has engulfed banks after the collapse of Silicon Valley Bank about 10 days ago. If it will be enough to convince investors, the reaction of the market today and in the coming days will tell.

The discounted price

But let’s get back to the deal. Ubs, we said, saves Credit Suisse by giving in to the strong pressure coming from the government and the Swiss National Bank in recent days. To do this, he receives a series of important concessions and reassurances. The first and most obvious is the discounted price. Three billion Swiss francs, equal to 0.76 francs for each Credit Suisse share. The shares of the Swiss institution in crisis had closed on Friday at 1.86 francs, with a market capitalization of just over 7.4 billion francs. UBS had tried to obtain even more advantageous conditions: the first offer was equal to one billion (0.25 francs per share), the second was two billion.

The acquisition will not be paid for in cash: each Credit Suisse shareholder will receive one share of UBS for every 22.48 Credit Suisse shares held. Cold shower for the inmate Credit Suisse AT1 Bonds: “Fully Devalued” the bank’s bonds for 16 billion francs.

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State guarantees up to 9 billion to UBS for losses of Credit Suisse

But the preferential condition wrested from Ubs is not only the price. The 9 billion guarantees obtained by the Swiss government to cover possible losses of the former rival taken over and up to 100 billion Swiss francs of liquidity from the Swiss central bank also have an impact.

Furthermore, UBS has already announced that it is aiming for a cost cuts of 8 billion by 2027with an impact on employment estimated at around 10,000 seats brutally cut. UBS, in particular, is committed to downsizing Credit Suisse’s investment bank. The agreement, notwithstanding the usual rules, will not be submitted to the vote of the shareholders.

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