UBS is set to acquire Credit Suisse, its struggling Swiss counterpart, for $3.25 billion in a bid to avert a potential international banking crisis. The Swiss government has emphasized the importance of this deal, which will see the country’s largest bank absorb the second-largest, to prevent irreversible economic disruption both domestically and globally. The announcement of the takeover, which came after tense negotiations at the finance ministry in Bern, was well-received in Washington, Brussels, and London for its potential to reinforce financial stability. With time running out before the opening of the Asian and European markets on Monday, the details of the acquisition were unveiled at a press conference.
Swiss President Alain Berset, accompanied by UBS chairman Colm Kelleher and his Credit Suisse counterpart Axel Lehmann, as well as the finance minister and heads of the Swiss National Bank (SNB) central bank and financial regulator FINMA, announced the takeover deal. Berset highlighted the significance of this acquisition for restoring confidence in the financial markets, and emphasized that the potential consequences of Credit Suisse’s collapse would have been incalculable both domestically and internationally. Under the agreement, Credit Suisse shareholders will receive one UBS share for every 22.48 Credit Suisse shares, and the merger consideration will be three billion Swiss francs ($3.25 billion). Lehmann referred to the deal as the best available outcome given the recent unprecedented circumstances. The finance minister warned that bankruptcy for Credit Suisse would have resulted in irreparable economic turmoil and collateral damage for the Swiss financial market, posing a risk of contagion for other banks, including UBS. The acquisition was widely welcomed internationally for its potential to restore financial stability. The SNB also announced the availability of 100 billion Swiss francs in liquidity.
According to Keller-Sutter, the UBS takeover of Credit Suisse is not a bailout but a commercial solution. UBS Chairman Kelleher emphasized the importance of the deal for the financial structure of Switzerland and assured that UBS would remain solid. Credit Suisse and UBS are both classified as Global Systemically Important Banks, meaning they are too big to fail. However, the market perceived Credit Suisse as a weak link after its share price plummeted by over 30 percent on Wednesday. After a $54-billion lifeline from the SNB, Credit Suisse’s share price slightly recovered but closed eight percent down on Friday. In 2022, the bank incurred a net loss of $7.9 billion and expects a substantial pre-tax loss this year. The deal involves Credit Suisse shareholders receiving 0.76 Swiss francs per share. The Swiss Bank Employees Association warned that many jobs, including those outside the banking industry, are at stake due to the potential risks posed by Credit Suisse’s situation.
