UBS is in talks to take over all or part of Credit Suisse, with the boards of the two biggest Swiss lenders due to meet separately this weekend to consider what would be the most important banking combination in Europe since the financial crisis, according to several people briefed on the discussions.
The Swiss National Bank and regulator Finma are orchestrating the negotiations in a bid to boost confidence in the country’s banking sector, the sources said. Their intervention comes days after the central bank was forced to provide an emergency credit line of 50 billion Swiss francs ($54 billion) to Credit Suisse.
However, that failed to halt a plunge in its share price, which fell to record lows after its biggest investor ruled out providing more capital and its chairman admitted an exodus of customers wealth management had continued.
Share prices of Swiss lenders have diverged sharply in recent years. Over the past three years, UBS shares have gained around 120% while those of its smaller rival have plunged around 70%. The former has a market capitalization of $56.6 billion, while Credit Suisse closed Friday with a valuation of $8 billion.
In 2022, UBS generated $7.6 billion in profits, while Credit Suisse made a Loss of $7.9 billioneffectively wiping out revenue from the entire previous decade.
Swiss regulators told their US and UK counterparts on Friday evening that the merger of the two banks was a “plan A” to stop the collapse of investor confidence in Credit Suisse, one of the people said.
A number of options beyond a full takeover are being discussed, another person said, adding that the two sides are trying to assess regulatory constraints in different jurisdictions. This person added that UBS is also analyzing the potential risks of a deal.
The Swiss central bank wants lenders to agree on a simple and straightforward solution before markets open on Monday, one of the people said. There can be no assurance that a deal, which is expected to be approved by UBS shareholders, will be completed.
Credit Suisse and UBS declined to comment, as did the Swiss National Bank, Federal Reserve and Bank of England.
A full merger would create one of the world’s largest systemically important financial institutions in Europe. UBS has $1.1 billion in total assets on its balance sheet and Credit Suisse has $575 billion.
However, such a large transaction may turn out to be too cumbersome to execute. The Financial Times has previously reported that other options being considered include breaking up Credit Suisse and raising funds via a public offering from its ring-fenced Swiss division, with the wealth and asset management units being sold to UBS or others. other bidders.
UBS is on high alert for an emergency relief call from the Swiss government after investors became wary of Credit Suisse’s latest restructuring. Last year Chief Executive Ulrich Körner announced a plan to cut 9,000 jobs and turn much of his investment bank into a new entity called First Boston, headed by the former board member of administrationMichael Klein.
A possible takeover by its biggest rival would end nearly three years of scandal and chaos at Credit Suisse, 167 years old. The twin crises linked to the specialist financial group Greensill Capital and the family office Archegos – which both collapsed in the space of a few weeks in 2021 – resulted in billions of dollars in losses.
The lender was also fined for its role in Mozambique’s $2bn ‘tuna bond’ scandal and was the first Swiss bank to be convicted of a corporate crime after being discovered for laundering money for a Bulgarian cocaine cartel run by a former professional. wrestler.
Meanwhile, Credit Suisse has suffered from significant management turnover. Former CEO Tidjane Thiam resigned in 2020 after a spy scandal and a neighborhood dispute with a subordinate scandalized Zurich.
A year later, António Horta-Osório was installed as president. The former Lloyds Bank boss was brought in to clean up the Swiss lender’s culture. He was deported at the start of 2022 for excessive use of the business jet and for breaking Covid-19 quarantine rules to watch the European Football Championship final and the Wimbledon men’s tennis final on the same day .
Additional reporting by Robert Smith