The Swiss authorities, with the collaboration of the British and American ones, are working tirelessly to find an agreement that will secure the institution and ease pressure on the entire banking sector. The solution could be an intervention by the largest Swiss bank, which however aims to obtain some form of indemnity or help to cover possible legal costs and future losses. Second ReutersUBS seeks at least $6 billion in guarantees from the Swiss government
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Race against time to save Credit Suisse. The Swiss authorities, with the collaboration of the British and American ones, are working tirelessly to find an agreement that will secure the institution and ease pressure on the entire banking sector. The path identified, various media report, is that of an acquisition by Ubs, the largest Swiss bank. An agreement – it is the imperative – must be reached before the opening of the markets on Monday, possibly even earlier. According to Financial Times, an agreement could be reached already in the next few hours. The newspaper also reports that at the end of last week, Credit Suisse clients withdrew deposits worth 10 billion Swiss francs in a single day.
The agreement
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There are many knots to untie. Having set aside the initial skepticism, UBS aims to obtain concessions from the Swiss central bank and from FINMA, the market regulator, to complete the agreement. These include some form of indemnity or help to cover possible legal costs and future losses. Second Reuters, UBS seeks at least $6 billion in guarantees from the Swiss government. One of the biggest obstacles, according to rumors, would be the investment banking division of Credit Suisse, on which Ubs would have raised concerns for the accumulated losses and for the scandals of which it was the protagonist. Discussions also focus on the fate of Credit Suisse’s Swiss branch, one of the profitable parts of the group which lost 7.3 billion Swiss francs last year and is still counting on “substantial” losses in 2023. This arm brings together banking services at the retail and loans to SMEs. One of the avenues considered by analysts is that of an IPO, which would also avoid massive layoffs in Switzerland due to duplication with UBS’s activities. Second Reutersthe wedding between Credit Suisse and UBS could result in the cutting of 10,000 jobs.
The emergency measures
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According to Financial Times, Switzerland is reportedly preparing emergency measures to facilitate the acquisition of Credit Suisse by UBS. The authorities could among other things remove the six-week consultation period usually granted to shareholders for a takeover.
The interest of Deutsche Bank
While working on the outlines of the agreement, with UBS which could buy 100% or only a part of Credit Suisse, Deutsche Bank monitors to see if there should be openings that would allow it to buy some assets of the bank led by Ulrich Koerner. While no formal proposal has been presented at this time, internal debate at Deutsche Bank is proceeding over which Credit Suisse assets might be attractive and at what valuation. However, BlackRock has denied a possible interest in the negotiations.
Ubs, a giant worth 60 billion Swiss francs
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Ubs, the Swiss giant with a capitalization of 60 billion Swiss francs, is the eternal rival Credit Suisse. UBS has deep roots and is the result of the acquisition of 370 banks that took place over the course of over 170 years of history. In 1854 six private banks came together in Basel to form the Bankverein. After a series of operations in 1897 the Basler Bankverein became the Swiss Bank Corporation. Following further evolutions, Ubs was born in 1998 from the merger of the Union of Swiss Banks and Swiss Bank Corporation. The corporate structure of the Ubs group is very articulated. Among the relevant shareholders, according to what emerges from the banking group’s website, there are BlackRock with a 5.23% stake; Dodge & Cox International Stock Fund (3.02%); Massachusetts Financial Services Company (3.01%); Artisan Partners (3.15%) and Norges Bank (3.01%). The company’s operational structure consists of four divisions and operates globally. Switzerland is the only country where it operates in all five business areas: Personal Banking, Wealth Management, Corporate and Institutional Clients, Investment Banking and Asset Management. It has a network of around 200 branches, 4,600 client advisors, and reaches around 80% of its assets in Switzerland. From a financial point of view, the group closed 2022 with a net profit of 7.1 billion Swiss francs (7.63 billion dollars), an income up 1.3% to 8.86 billion francs ( $9.6 billion). A dividend of 0.51 francs per share was allocated to the shareholders. The Zurich giant will also launch a new 4.6 billion francs ($5 billion) share buyback program.