UBS to buy Credit Suisse for $3.3B

Swiss regulators said to be pushing deal to restore stability to financial system

UBS CEO Sergio Ermotti and Credit Suisse CEO Ulrich Körner
UBS CEO Sergio Ermotti and Credit Suisse CEO Ulrich Körner (Getty)

UPDATE (2 p.m.): UBS has agreed to buy beleaguered Credit Suisse for $3.3 billion, the Financial Times and Bloomberg reported

As part of the deal, the Swiss National Bank will provide a 100 billion Swiss francs liquidity line to Credit Suisse, according to the FT.

With the Credit Suisse acquisition and the collapse of two banks last week, at least two major European banks are looking for signs of contagion and are seeking stronger indicators of support from the Federal Reserve and ECB, according to Reuters.  

ORIGINAL VERSION:  In an effort to stabilize the banking system, Swiss regulators have brokered a deal that would see UBS buy Credit Suisse for about $1 billion, the Wall Street Journal reported.

UBS, Switzerland’s biggest bank, is one of the largest managers of real estate in the world, according to its website.

The deal would mark a discount of nearly 90 percent from the market capitalization for Credit Suisse, Switzerland’s second-largest bank, at the close of the markets on Friday. 

The terms and structure of the deal, which was first reported by the Financial Times, are still in flux. 

Credit Suisse believes the price is too low and would be too damaging to stockholders, Bloomberg reported, citing sources familiar with the matter. How bondholders would be affected hadn’t been determined — with losses being higher if Credit Suisse is wound down instead of taken over by UBS, Reuters reported

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A final decision on imposing losses on bondholders has not been taken, and the terms could still change, according to sources. Losses imposed on bondholders may need to be larger if Credit Suisse were wound down rather than if it were taken over by UBS, one of the sources said.

Another issue is what cost-saving measures, including job cuts, Swiss regulators would allow UBS to make, the Journal reported. 

Still, regulators are hoping to finalize the deal before the opening of Asian markets, the Journal reported.

Swiss bylaws would typically give UBS shareholders a month and a half to consider such a large deal, but that country’s regulators are working to work around a shareholder vote, according to the Financial Times.

The potential deal comes after Credit Suisse’s stocks plummeted last week over liquidity concerns following the collapse of both Silicon Valley Bank and Signature Bank, which roiled the global financial markets last week.

Credit Suisse, Switzerland’s second-largest bank and one of 30-worldwide deemed systematically important, borrowed $54 billion from the Swiss National Bank on Thursday in a failed attempt to restore investor confidence. The move didn’t work, as Credit’s Suisse’s shares continued to tumble by about 24 percent.

The bank, according to the Journal, saw as much as $10 billion in daily withdrawals, leading to regulators’ concerns over the its solvency and the impact declining confidence would have on other banks.

Ted Glanzer

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