A decisive day to avoid a debacle. Switzerland’s largest bank UBS, pushed by the authorities, must absolutely finalize the takeover of its rival Credit Suisse this Sunday to prevent a wave of contagious panic on the markets on Monday. And according to the Financial Timesit would have made a first offer.
According to the British daily, UBS would be ready to pay only 1 billion dollars (930 million euros). An offer rejected by Credit Suisse with the support of its main shareholder the Saudi National Bank, according to Bloomberg. The transaction would be in shares only, explains the Financial Times at a price of 25 centimes per share, an action which was still worth 1.86 francs at the close of Friday for a total valuation of just under 9 billion.
Pressure from social partners
The transaction has been examined in Bern by the federal government since the beginning of the morning, already meeting urgently on Thursday and Saturday. The agreement will be sealed during the day during an extraordinary meeting of the government and the leaders of the two banking giants in Bern, the tabloid said on Saturday. Blick, generally knowledgeable. A merger of the country’s two largest banks, one of which is attracting growing investor suspicion, is a complex affair that normally could take months. UBS will have had a few days.
But the Swiss authorities have no choice but to push UBS to overcome its reluctance, due to the enormous pressure exerted by Switzerland’s major economic and financial partners who fear for their own financial center, says Blick. Because of the speed with which the negotiations are carried out, the social partners are concerned. A union demanded to participate in the negotiations, recalling that Credit Suisse employs 17,000 people in Switzerland.
Bruno Le Maire, the French finance minister, made the message clear in The Parisian “We now expect a definitive and structural solution to the problems of this bank”. The US Treasury had also indicated that it was following the case closely. The Swiss market opens at 8 a.m. Monday and a solution will have to be found by then for the bank perceived as a weak link in the sector.
A request for guarantees
According to the Bloomberg agency, UBS is demanding that the public authorities bear legal costs and potential losses that can amount to billions of Swiss francs. The discussions stumble on the investment bank, indicates the financial agency, one of the scenarios under study being a takeover only of asset and wealth management with a sale of the investment bank.
The discussions also concern the fate to be reserved for the Swiss branch of Credit Suisse, 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. branch brings together retail banking and loans to SMEs. One of the avenues considered by analysts is that of an IPO, which would also avoid massive layoffs in Switzerland because of duplication with UBS’s activities.
Bad management of Credit Suisse pointed out
On Wednesday, the distrust of investors and partners prompted the Swiss Central Bank to lend 50 billion Swiss francs to breathe new life into Credit Suisse and reassure the markets. However, the respite was only short-lived.
Credit Suisse has just experienced two years marked by several scandals which revealed, by management’s own admission, “substantial weaknesses” in its “internal control”. By contrast, UBS, which spent several years recovering from the shock of the 2008 financial crisis and a massive state bailout, is beginning to reap the rewards of its efforts, and according to several media outlets the bank had no intention before the weekend to embark on the Credit Suisse adventure.