The Swiss bank could take over all or part of the ailing Credit Suisse.
(Photo: Bloomberg)
Zurich The major Swiss bank UBS is negotiating a takeover, in whole or in part, with its crisis-ridden competitor Credit Suisse. A corresponding report by the “Financial Times” on Friday evening was confirmed to the Handelsblatt by people familiar with the talks.
The Swiss financial regulator has informed its colleagues in the US and UK that this is the preferred solution to the Credit Suisse crisis, the newspaper reports. The management bodies of both banks are to initially discuss the merger individually at the weekend. However, it is uncertain whether a deal will come about. The concerns of the management teams on both sides are great.
Insiders therefore expect that UBS will enter the negotiations with Credit Suisse organized by the Swiss National Bank and financial regulator Finma with maximum demands. For example, UBS could try to negotiate some kind of loss limit guaranteed by the Swiss government.
Credit Suisse and UBS declined to comment. The stock exchange reacted promptly to the news: Credit Suisse shares listed in the USA suddenly rose in price by around nine percent.
Should UBS actually take over Credit Suisse, the Swiss supervisors would have prevailed against UBS’s resistance. When asked about takeover rumors, UBS boss Ralph Hamers always emphasized that he wanted to focus on growing his own wealth management. In Switzerland, too, the step was considered politically unpopular with a view to possible job losses.
The Credit Suisse crisis had become so acute over the course of the week that those responsible apparently felt compelled to come up with a major solution. The aim of the merger is to ensure the stability of the Swiss financial center, it said in the “FT” report.
Merger with big risks
On Wednesday, the thoughtless and possibly misleading statement by a major Saudi shareholder plunged Credit Suisse into chaos. The stock fell at times by more than 30 percent. A liquidity injection from the Swiss National Bank (SNB) of 50 billion francs (50.7 billion euros) gave the bank only a short breath.
The fact that the supervisors now want to push through a takeover by UBS suggests that the outflow of customer money over the past week had become too large.
A takeover of Credit Suisse by UBS had recently been repeatedly calculated by investment bankers and analysts. A counter-argument has always been that both banks could cannibalize each other in the event of a merger. Many Swiss companies as well as wealthy private individuals have an account with both UBS and Credit Suisse.
You want to avoid parking all of your cash or liquid assets at a bank. Many customers are therefore likely to withdraw part of their assets after the merger. Any synergies on the Swiss home market would thus be reduced. The Swiss cantonal banks on the one hand and the private banks on the other could be the winners of such a merger.
What’s more, should UBS gobble up Credit Suisse, the result would be a banking giant that would be far too big to fail.
More: You can read all developments regarding the banking crisis in the news blog.