According to a report in the Financial Times, the major Swiss bank UBS is said to be interested in taking over part or all of its ailing competitor Credit Suisse (CS). As the newspaper reports, citing insiders, the supervisory boards of the two largest Swiss credit institutions want to meet separately at the weekend to hold appropriate consultations. It would be the most momentous bank merger in Europe since the financial crisis. When asked on Saturday, UBS and Credit Suisse said they would not comment.
According to the report, the Swiss National Bank and the Swiss regulator Finma are organizing the talks to boost confidence in the country’s banking sector. The regulators have told their US and UK counterparts that a merger of the two banks is their “Plan A.” Other options would also be discussed. The Swiss National Bank wants to find an uncomplicated solution before the markets open on Monday. The Financial Times writes that there is no guarantee that an agreement will be reached. According to the newspaper, the Bank of England and the US Federal Reserve declined to comment.
The lurching major bank Credit Suisse had recently suffered from a significant loss of investor confidence. The share price had fallen to a record low after the bank’s largest investor ruled out providing further capital and the institution continued to struggle with cash outflows. The Swiss National Bank (SNB) then provided the institute with loans of up to CHF 50 billion (almost EUR 51 billion). For the central bank, financial regulators and government, it is also about preventing a general banking crisis.
A full merger would create one of the largest systemically important financial institutions in Europe. The balance sheet total of UBS – the largest Swiss bank – amounted to the equivalent of 1,030 billion euros in 2022, and that of Credit Suisse to the equivalent of 535.44 billion euros. In 2022, UBS had made a profit of 7.6 billion dollars (currently 7.07 billion euros). Credit Suisse, on the other hand, posted a loss of CHF 7.3 billion (EUR 7.4 billion).
In the entire past financial year, Credit Suisse customers had withdrawn assets of around CHF 123 billion. The bank’s stock market value has fallen by around two-thirds to almost nine billion francs in the past twelve months. At its peak in the mid-nineties, the bank was worth more than 110 billion francs.
After the collapse of the start-up financier Silicon Valley Bank, which started the banking quake, and the turbulence surrounding Credit Suisse, Chancellor Olaf Scholz (SPD) sees no danger of a new major crisis in Germany and Europe – and no consequences for Germans Saver. The monetary system is no longer as fragile as before the financial crisis. The deposits are safe, he recently told the “Handelsblatt”.
The FDP parliamentary group leader in the Bundestag, Christian Dürr, also emphasized: “The security mechanisms are better today than they were 15 years ago.” With a view to the latest interest rate hike in the euro area, he said that the European Central Bank is independent and committed to monetary stability. “The stability of money is incredibly important for confidence in the economy and households. It would be a big mistake to ignore that because individual banks have managed poorly,” Dürr told Mediengruppe Bayern.
The citizens’ movement Finanzwende asked Finance Minister Christian Lindner (FDP) to financial markets to regulate more strictly. A stable financial system is finally needed, as has been promised for 15 years, according to the club in a petition it started on Saturday. In it, Finanzwende calls for the completion of the European banking union, the introduction of a separate banking system and a Financial Transaction Tax and the regulation of shadow banks. “After the financial crisis of 2008, strict rules should actually be created for banks,” said Gerhard Schick, member of the board of directors of Finanzwende. However, the regulation of the financial markets is not up to the challenges of our time.
BlackRock reviews competing takeover bid for Credit Suisse
Asset manager BlackRock has drawn up a competing bid for Credit Suisse that would trump a plan approved by the Swiss Central Bank (SNB) for UBS to take over the struggling competitor, five people familiar with the matter told the Financial Times. The US investment giant has been reviewing a number of options and speaking to other potential investors, according to people familiar with the matter. Options also included offers for only parts of the company.
However, BlackRock told the newspaper on Saturday that it “is not involved in and has no interest in any plans to acquire all or any portion of Credit Suisse.” Larry Fink, co-founder and chief of the wealth manager, was the driving force behind the offering, according to people familiar with the matter, the report said. Fink used to work at First Boston, Credit Suisse’s investment banking business, according to the Financial Times.
BlackRock has long been one of Credit Suisse’s largest investment banking clients, particularly in the fixed income trading space. A takeover, particularly for the US business, would be a good opportunity to bring trading capacity in-house, according to one of the people. However, any agreement would have to overcome significant regulatory hurdles in Europe and the US, the report continues.
However, the SNB and regulator Finma would prefer a Swiss solution to solve the crisis at Credit Suisse, the report said, citing people familiar with the matter. The Financial Times reported on Friday that UBS is in talks to acquire all or part of Credit Suisse Group. Swiss regulators backed the talks as they would boost confidence in the country’s banking sector, the newspaper said, citing “several people” familiar with the talks. Credit Suisse declined to comment on the newspaper.
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