Market Updates
Switzerland Forced Merger of Credit Suisse with UBS and Prevent Wider Fallout
Scott Peters
20 Mar, 2023
New York City
Credit Suisse Group AG plunged 52% to 96 cents in New York trading after the troubled Swiss bank agreed to be acquired by the rival UBS.
In a deal negotiated by the Swiss regulators and the Swiss National Bank, UBS agreed to pay 50 Swiss cents per share or $3.25 billion, significantly less than the expected price for shareholders.
The Swiss National Bank agreed to provide up to 100 billion Swiss francs in liquidity and the Swiss government will offer a loss guarantee of up to 9 billion Swiss francs but UBS will be responsible for the first 5 billion Swiss francs of potential losses.
After four years of oversight lapses, management turmoil, multiple scandals and steady but rising deposit outflows in the last two years, regulators forced the 167-year old Swiss institution to be acquired by UBS.
Total assets held by Credit Suisse had declined to $70 billion just before the announcement of the transaction, indicating that a substantial part of the assets may be impaired or is expected to be impaired.
According to the sources in Zurich, London and New York, UBS was not interested in acquiring the troubled Credit Suisse and the bank was mildly interested in its asset management arm.
The deal orchestrated by the Swiss regulators and the central bank will pay stockholders but will write down $17 billion of AT1 bondholders which generally have a higher priority than shareholders in the credit structure.
After the merger, net assets under management will jump to $5 trillion with the addition of $1.3 trillion from Credit Suisse.
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