UBS in talks to acquire embattled Credit Suisse: Financial Times
Mega-merger in Swiss banking sector could be on the cards
Times of Malta | 03/18/2023
Mega-merger in Swiss banking sector could be on the cards
Times of Malta | 03/18/2023
Credit Suisse could be bought up by UBS. Photo: AFP
Switzerland's largest bank, UBS, is in talks to buy all or part of Credit Suisse, according to a report by the Financial Times.
Credit Suisse -- Switzerland's second-biggest bank -- came under pressure this week as the failure of two US regional lenders rocked the sector. By the close of markets Friday, its shares had dropped eight per cent.
The Swiss National Bank (SNB) and financial markets watchdog FINMA told their US and British counterparts their "plan A" to stop the crisis of confidence facing Credit Suisse was to merge it with UBS, the FT reported Friday, citing unnamed sources.
The Swiss central bank "wants the lenders to agree on a simple and straightforward solution before markets open on Monday", the source said, while acknowledging there was "no guarantee" of a deal.
UBS wants to assess what risks a full or partial takeover of its rival could pose to its own business, another source told the FT.
When reached by AFP, both SNB and Credit Suisse declined to comment, while UBS and Finma did not respond immediately.
Credit Suisse, which has been in turmoil for two years, has been seen as a weak link in the banking sector due to a series of scandals and a major restructuring programme launched last October.
Its market value took a heavy blow this week over fears of contagion from the collapse of two US banks -- Silicon Valley Bank and Signature Bank -- along with the publication of its annual report, which cited "material weaknesses" in internal controls.
But shares nosedived to historic lows Wednesday after its main shareholder, Saudi National Bank, said it would not raise its stake in the group due to regulatory constraints.
By Wednesday evening, SNB had stepped in with a $53.7 billion lifeline to reinforce the group.
The idea of a takeover by UBS was also floated this week by analysts at JP Morgan, calling it "the most likely" scenario.
The idea of Switzerland's biggest banks joining forces regularly resurfaces but is generally dismissed due to competition issues and risks to the Swiss financial system's stability, given the size of the bank that would be created by such a merger.
Switzerland's largest bank, UBS, is in talks to buy all or part of Credit Suisse, according to a report by the Financial Times.
Credit Suisse -- Switzerland's second-biggest bank -- came under pressure this week as the failure of two US regional lenders rocked the sector. By the close of markets Friday, its shares had dropped eight per cent.
The Swiss National Bank (SNB) and financial markets watchdog FINMA told their US and British counterparts their "plan A" to stop the crisis of confidence facing Credit Suisse was to merge it with UBS, the FT reported Friday, citing unnamed sources.
The Swiss central bank "wants the lenders to agree on a simple and straightforward solution before markets open on Monday", the source said, while acknowledging there was "no guarantee" of a deal.
UBS wants to assess what risks a full or partial takeover of its rival could pose to its own business, another source told the FT.
When reached by AFP, both SNB and Credit Suisse declined to comment, while UBS and Finma did not respond immediately.
Credit Suisse, which has been in turmoil for two years, has been seen as a weak link in the banking sector due to a series of scandals and a major restructuring programme launched last October.
Its market value took a heavy blow this week over fears of contagion from the collapse of two US banks -- Silicon Valley Bank and Signature Bank -- along with the publication of its annual report, which cited "material weaknesses" in internal controls.
But shares nosedived to historic lows Wednesday after its main shareholder, Saudi National Bank, said it would not raise its stake in the group due to regulatory constraints.
By Wednesday evening, SNB had stepped in with a $53.7 billion lifeline to reinforce the group.
The idea of a takeover by UBS was also floated this week by analysts at JP Morgan, calling it "the most likely" scenario.
The idea of Switzerland's biggest banks joining forces regularly resurfaces but is generally dismissed due to competition issues and risks to the Swiss financial system's stability, given the size of the bank that would be created by such a merger.
Nathalie OLOF-ORS
Sat, March 18, 2023
UBS and Credit Suisse, the two biggest banks in Switzerland, are in takeover talks, according to several media -- a move long deemed unthinkable as the pair are so similar.
The negotiations, which would see UBS take over its embattled smaller domestic rival, are being orchestrated by the Swiss regulators in an attempt to reassure the markets before they re-open on Monday.
Credit Suisse is still looking shaky despite taking a $54-billion lifeline thrown by the Swiss central bank. Investors remain nervous about its future following the collapse of two banks in the United States that sparked contagion fears.
During the week, US analysts had already floated the possibility of a takeover by UBS, which made a healthy $7.6 billion dollars in net profit in 2022.
Rivals Credit Suisse, headquartered no more than 300 metres away in central Zurich, meanwhile suffered a loss of 7.3 billion Swiss francs ($7.9 billion).
- Wealth management, investment banking -
Both banks derive most of their revenue from wealth management and investment banking.
UBS is the world leader in wealth management and generated nearly 15 percent of its $34.5 billion in turnover in 2022 through this global arm.
At Credit Suisse -- level with the United States' Morgan Stanley in second place -- wealth management contributed 22 percent of the 22.4 billion Swiss francs in turnover.
Investment banking represents 25.2 percent of UBS's turnover, compared to nearly 20.6 percent at Credit Suisse, with the pair running many similar activities such as mergers and acquisitions advice.
In October, Credit Suisse began a major restructuring project that plans to separate its investment banking from the rest of its activities, after a series of scandals.
However, many investors consider the revamp to be too complex -- and UBS might want to steer clear of taking over Credit Suisse's problematic investment banking.
- Retail banking in Switzerland -
Both banks are active in asset management and retail banking. UBS relies on a network of nearly 200 branches in Switzerland, compared to 95 for Credit Suisse.
The Swiss domestic branch of Credit Suisse, considered one of its jewels, is particularly active in mortgages and loans to small- and medium-sized businesses.
In a note Thursday, analysts at US financial services giant JPMorgan thought this arm of Credit Suisse would probably have to be spun off or listed separately on the stock exchange in the event of a merger.
Switzerland's Competition Commission might be reluctant to approve a merger in this field.
- Pillars of Swiss banking -
UBS and Credit Suisse are at the apex of banking in a country known worldwide for its banking industry.
UBS, in its modern form, was born in 1998 when the Swiss Bank Corporation merged with the Union Bank of Switzerland.
SBC's origins date back to 1854 when six wealth management establishments in Basel joined forces, while the Union Bank of Switzerland dates back to 1852 and the creation of a bank in Winterthur, a city at the heart of the industrial revolution in Switzerland.
Credit Suisse was born around the same time in 1856, at the instigation of Alfred Escher who wanted to finance the Swiss railway boom.
Credit Suisse has also contributed to the emergence of insurance stalwarts, such as Swiss Life and Swiss Re, and industrial giants like Brown Boveri, ancestor of the ABB engineering group.
Today the two banks are global groups, with UBS employing 72,597 people and Credit Suisse 50,480.
- Careers crossing between banks -
With the two banks' headquarters so close to each other, it is not uncommon for careers to be made with one and then continue at the other.
Credit Suisse chairman Axel Lehmann spent more than 11 years at UBS before being called to the rescue in 2021 to turn Credit Suisse around.
And Credit Suisse chief executive Ulrich Korner left the bank to join UBS before returning, first to save the asset management branch and then the whole bank by taking the CEO hotseat.
noo/rjm/jj
Troubled bank stocks drop despite $84bn liquidity boost
03/17/2023
European shares logged their steepest weekly drop in five months amid continued turbulence in the global banking sector. German Chancellor Olaf Scholz doesn't think Europe is heading for a new financial crisis.
Shares of First Republic Bank and Credit Suisse dove back deep into the red on Friday as concerns of a wider banking crisis in the United States and Europe remained elevated.
The US regional lender's perceived value slumped 25% while Switzerland's second-largest bank closed down 8%, despite massive financial lifelines thrown by regulators over the previous 24 hours.
Larger US banks, including JPMorgan Chase & Co and Morgan Stanley, stepped in on Thursday to inject $30 billion (€28 billion) into First Republic to prevent it from suffering a run by depositors similar to Silicon Valley Bank and Signature Bank — two regional lenders that went under last week.
The shoring up of First Republic reflected "funding and liquidity strains on banks, driven by weakening depositor confidence," said ratings agency Moody's, which this week downgraded its outlook on the US banking system to negative.
Swiss intervention buys time
In Europe, the Swiss central bank gave Credit Suisse an emergency loan of up to $54 billion, also on Thursday.
But many analysts, investors and bankers think the loan facility has only bought Credit Suisse some time to work out what to do next.
The US and Swiss moves did initially boost stock markets. However, the selloff resumed Friday and the stock prices of other major banks also fell, with JP Morgan, Citigroup and Bank of America down at least 3% at one point. Many of their European peers ended Friday down around 1.5%.
Eswar Prasad, a Cornell University economist, said Credit Suisse has become "an important bellwether of fragilities in the global banking system" and if it failed, it could shake confidence in the banking system, causing further central bank intervention.
In a sign of falling confidence, Morningstar Direct said the Swiss bank had seen more than $450 million in net outflows from its US and European-managed funds from March 13 to 15.
Reuters, meanwhile, cited five unnamed sources as saying that at least four major banks, including Societe Generale SA and Deutsche Bank AG, have put restrictions on their trades involving Credit Suisse Group AG or its securities.
Scholz says no 'danger' of new financial crisis
Despite the market volatility, German Chancellor Olaf Scholz told business daily Handelsblatt Friday that he doesn't believe that Europe is heading for a crisis.
"I don't see that danger," Scholz said, adding that deposits are safe. "We live in a completely different time," he told the paper, referring to comparisons with the 2008 financial crisis. Scholz is also a former finance minister.
Meanwhile, Reuters reported Friday that supervisors at the European Central Bank (ECB) saw no contagion for eurozone banks from the turmoil.
A source told the news agency that members of the Single Supervisory Board were told deposits remained stable across eurozone banks. Exposure to Credit Suisse was said to be immaterial.
The meeting — a reaction to rapid developments in the banking sector and market jitters — was the second of its kind this week.
Despite the reassurances, investors are betting that banking jitters would rein in the ECB's ability to raise interest rates much further after the central bank hiked by 0.5% on Thursday.
All eyes on next Fed meeting
Focus now shifts to the US Federal Reserve next week, with traders now seeing a 67% likelihood of a smaller 0.25% increase in interest rates in the world's largest economy.
Speculation on when the Fed might start slowing its increases had been ripe for months, but the SVB collapse poured fuel on that fire last week.
SVB's demise was largely blamed on the sharp rise in borrowing costs, and concerns that other banks could suffer a similar fate, even sparking speculation that the Fed could cut rates to provide some stability. However, SVB's critics see the fault lying in the bank's own strategic errors, remaining overexposed to low-yield, long-term bonds even as interest rates and inflation were wiping out their returns.
Later Friday, SVB Financial — the parent company of Silicon Valley Bank — filed for a court-supervised reorganization under Chapter 11 bankruptcy protection.
The filing sets up a legal battle over the bank's remaining assets between the creditors of the holding company and regulators who are looking to make depositors whole.
SVB Financial Group believes it has approximately $2.2 billion of liquidity and has said it has other valuable securities and assets that are being considered for sale.
mm/msh (AFP, AP, Reuters)
03/17/2023
European shares logged their steepest weekly drop in five months amid continued turbulence in the global banking sector. German Chancellor Olaf Scholz doesn't think Europe is heading for a new financial crisis.
Shares of First Republic Bank and Credit Suisse dove back deep into the red on Friday as concerns of a wider banking crisis in the United States and Europe remained elevated.
The US regional lender's perceived value slumped 25% while Switzerland's second-largest bank closed down 8%, despite massive financial lifelines thrown by regulators over the previous 24 hours.
Larger US banks, including JPMorgan Chase & Co and Morgan Stanley, stepped in on Thursday to inject $30 billion (€28 billion) into First Republic to prevent it from suffering a run by depositors similar to Silicon Valley Bank and Signature Bank — two regional lenders that went under last week.
The shoring up of First Republic reflected "funding and liquidity strains on banks, driven by weakening depositor confidence," said ratings agency Moody's, which this week downgraded its outlook on the US banking system to negative.
Swiss intervention buys time
In Europe, the Swiss central bank gave Credit Suisse an emergency loan of up to $54 billion, also on Thursday.
But many analysts, investors and bankers think the loan facility has only bought Credit Suisse some time to work out what to do next.
The US and Swiss moves did initially boost stock markets. However, the selloff resumed Friday and the stock prices of other major banks also fell, with JP Morgan, Citigroup and Bank of America down at least 3% at one point. Many of their European peers ended Friday down around 1.5%.
Eswar Prasad, a Cornell University economist, said Credit Suisse has become "an important bellwether of fragilities in the global banking system" and if it failed, it could shake confidence in the banking system, causing further central bank intervention.
In a sign of falling confidence, Morningstar Direct said the Swiss bank had seen more than $450 million in net outflows from its US and European-managed funds from March 13 to 15.
Reuters, meanwhile, cited five unnamed sources as saying that at least four major banks, including Societe Generale SA and Deutsche Bank AG, have put restrictions on their trades involving Credit Suisse Group AG or its securities.
Scholz says no 'danger' of new financial crisis
Despite the market volatility, German Chancellor Olaf Scholz told business daily Handelsblatt Friday that he doesn't believe that Europe is heading for a crisis.
"I don't see that danger," Scholz said, adding that deposits are safe. "We live in a completely different time," he told the paper, referring to comparisons with the 2008 financial crisis. Scholz is also a former finance minister.
Meanwhile, Reuters reported Friday that supervisors at the European Central Bank (ECB) saw no contagion for eurozone banks from the turmoil.
A source told the news agency that members of the Single Supervisory Board were told deposits remained stable across eurozone banks. Exposure to Credit Suisse was said to be immaterial.
The meeting — a reaction to rapid developments in the banking sector and market jitters — was the second of its kind this week.
Despite the reassurances, investors are betting that banking jitters would rein in the ECB's ability to raise interest rates much further after the central bank hiked by 0.5% on Thursday.
All eyes on next Fed meeting
Focus now shifts to the US Federal Reserve next week, with traders now seeing a 67% likelihood of a smaller 0.25% increase in interest rates in the world's largest economy.
Speculation on when the Fed might start slowing its increases had been ripe for months, but the SVB collapse poured fuel on that fire last week.
SVB's demise was largely blamed on the sharp rise in borrowing costs, and concerns that other banks could suffer a similar fate, even sparking speculation that the Fed could cut rates to provide some stability. However, SVB's critics see the fault lying in the bank's own strategic errors, remaining overexposed to low-yield, long-term bonds even as interest rates and inflation were wiping out their returns.
Later Friday, SVB Financial — the parent company of Silicon Valley Bank — filed for a court-supervised reorganization under Chapter 11 bankruptcy protection.
The filing sets up a legal battle over the bank's remaining assets between the creditors of the holding company and regulators who are looking to make depositors whole.
SVB Financial Group believes it has approximately $2.2 billion of liquidity and has said it has other valuable securities and assets that are being considered for sale.
mm/msh (AFP, AP, Reuters)
Credit Suisse to borrow $54 billion from Swiss central bank
The move to borrow from the Swiss National Bank makes Credit Suisse the first major global bank to be extended such a lifeline since the 2008 global financial crisis.
DW
What's so significant about the move?
The move to borrow from the Swiss National Bank (SNB) makes Credit Suisse the first major global bank to be extended such a lifeline since the 2008 global financial crisis. Swiss authorities on Wednesday said Credit Suisse met "the capital and liquidity requirements imposed on systemically important banks" and that it could access central bank liquidity if needed.
Central banks across the world extend liquidity to banks during periods of market turmoil, including that induced by the COVID pandemic. The steps come during a severe slump in Credit Suisse's share price that triggered larger fears of a broader bank deposit crisis.
The bank also made a buyback offer on $2.5 billion worth of US debt and €500 million in European debt.
"These measures demonstrate decisive action to strengthen Credit Suisse as we continue our strategic transformation to deliver value to our clients and other stakeholders," said the investment firm's Chief Executive Officer, Ulrich Körner.
What triggered the selloff?
Credit Suisse's stock fell as much as 30% on Wednesday triggered by a Bloomberg TV interview where Mr. al-Khudairy of the Saudi National Bank — Credit Suisse's largest shareholder — said it would "absolutely not" push more liquidity into the bank. He later clarified that his staunch position was to abide by regulatory rules and statutory limitations.
The market, already on edge from last week's collapse of two mid-size US firms Silicon Valley Bank and Signature Bank, continued to sell Credit Suisse shares despite reassurance that the bank had a strong liquidity base with a 150% cash deposit ratio. A cash deposit ratio is the amount of money a bank should have available as a percentage of the total amount of money its customers have deposited in the bank.
Meanwhile, two supervisory sources told Reuters news agency that the European Central Bank had contacted banks on its watch to question them about their exposures to Credit Suisse. The US Treasury also said it is monitoring the situation around Credit Suisse and is in touch with global counterparts, according to a Treasury spokesperson.
mk/sms (Reuters, AFP)
The move to borrow from the Swiss National Bank makes Credit Suisse the first major global bank to be extended such a lifeline since the 2008 global financial crisis.
DW
03/16/2023
https://p.dw.com/p/4OkND
Switzerland-based global bank Credit Suisse AG said it would borrow 50 billion Swiss francs (€50.7 billion, $54 billion) from the country's central bank on Thursday, in a move meant to strengthen its liquidity and deposit reserves.
Shares of the embattled investment bank and financial firm soared in trading after the announcement, which followed the worst trading day in Credit Suisse's history.
https://p.dw.com/p/4OkND
Switzerland-based global bank Credit Suisse AG said it would borrow 50 billion Swiss francs (€50.7 billion, $54 billion) from the country's central bank on Thursday, in a move meant to strengthen its liquidity and deposit reserves.
Shares of the embattled investment bank and financial firm soared in trading after the announcement, which followed the worst trading day in Credit Suisse's history.
What's so significant about the move?
The move to borrow from the Swiss National Bank (SNB) makes Credit Suisse the first major global bank to be extended such a lifeline since the 2008 global financial crisis. Swiss authorities on Wednesday said Credit Suisse met "the capital and liquidity requirements imposed on systemically important banks" and that it could access central bank liquidity if needed.
Central banks across the world extend liquidity to banks during periods of market turmoil, including that induced by the COVID pandemic. The steps come during a severe slump in Credit Suisse's share price that triggered larger fears of a broader bank deposit crisis.
The bank also made a buyback offer on $2.5 billion worth of US debt and €500 million in European debt.
"These measures demonstrate decisive action to strengthen Credit Suisse as we continue our strategic transformation to deliver value to our clients and other stakeholders," said the investment firm's Chief Executive Officer, Ulrich Körner.
What triggered the selloff?
Credit Suisse's stock fell as much as 30% on Wednesday triggered by a Bloomberg TV interview where Mr. al-Khudairy of the Saudi National Bank — Credit Suisse's largest shareholder — said it would "absolutely not" push more liquidity into the bank. He later clarified that his staunch position was to abide by regulatory rules and statutory limitations.
The market, already on edge from last week's collapse of two mid-size US firms Silicon Valley Bank and Signature Bank, continued to sell Credit Suisse shares despite reassurance that the bank had a strong liquidity base with a 150% cash deposit ratio. A cash deposit ratio is the amount of money a bank should have available as a percentage of the total amount of money its customers have deposited in the bank.
Meanwhile, two supervisory sources told Reuters news agency that the European Central Bank had contacted banks on its watch to question them about their exposures to Credit Suisse. The US Treasury also said it is monitoring the situation around Credit Suisse and is in touch with global counterparts, according to a Treasury spokesperson.
mk/sms (Reuters, AFP)
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