UBS acquires Credit Suisse

UBS, Switzerland’s biggest bank, is set to acquire struggling rival Credit Suisse in a $3.25 billion deal aimed at stabilising the financial market and protecting the Swiss economy. The Swiss government agreed to change the law to remove any uncertainty about the deal, and shareholders’ approval is not needed. Credit Suisse shareholders will receive 0.76 Swiss francs in UBS shares, which is worth much less than the stock was worth on Friday. Owners of $17 billion worth of “additional tier one” bonds will lose everything.

Credit Suisse has been losing the trust of investors and customers for years, and last year, it recorded its worst loss since the global financial crisis. Shares in the 167-year-old bank fell 25% over the week, and the Swiss National Bank’s emergency loan of nearly $54 billion failed to stop the bleeding. However, the loan did “build a bridge” to the weekend to allow the rescue to be pieced together, Swiss officials said. The takeover will reinforce UBS’s position as the world’s leading wealth manager with $5 trillion of invested assets and boost its ambition to grow in the Americas and Asia. UBS expects to generate cost savings of $8 billion per year by 2027.

UBS Chief Executive Ralph Hamers will be CEO of the combined bank, and Colm Kelleher will serve as chairman. The global headquarters of UBS and Credit Suisse are just 300 yards apart in Zurich, but the banks’ fortunes have been on different paths recently. Shares of UBS have climbed 15% in the past two years, and it booked a profit of $7.6 billion in 2022, while Credit Suisse shares have lost 84% of their value over the same period, and last year it posted a loss of $7.9 billion.

The Swiss National Bank said it would provide a loan of 100 billion Swiss francs ($108 billion) to UBS and Credit Suisse to boost liquidity. Financial market regulators around the world applauded UBS’ action to take over Credit Suisse. US authorities supported the action and worked closely with the Swiss central bank to assist the takeover. Christine Lagarde, President of the European Central Bank, said the banking sector remains resilient but the ECB stands ready to help banks maintain enough cash on hand to fund their operations if the need arises. The Bank of England welcomed the measures taken by the Swiss authorities “to support financial stability.”