The headquarters of Credit Suisse in Zurich, March 18, 2023 (AFP / Fabrice COFFRINI)
Switzerland’s largest bank UBS, pushed by the authorities, must absolutely finalize the takeover of its rival Credit Suisse this Sunday to hope to avoid a debacle and a wave of contagious panic on the markets on Monday.
UBS will buy Credit Suisse and the deal will be sealed on Sunday during an extraordinary meeting of the government and the leaders of the two banking giants in Bern, the generally well-informed tabloid Blick said on Saturday.
A merger of the two largest banks in the country, one of which is arousing growing investor mistrust and a complex affair that normally could take months. UBS will have had a few days.
– Pressure –
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.
Bruno Le Maire, the French Minister of Finance made the message clear in Le Parisien: “We are now waiting for a definitive and structural solution to the problems of this bank”.
The US Treasury had also indicated that it was following the case closely.
UBS and Credit Suisse signs in a street in Zurich, March 18, 2023 (AFP / Fabrice COFFRINI)
The Swiss market opens at 08:00 GMT on Monday and a solution will have to be found by then for the bank perceived as a weak link in the sector.
At the close of the stock market on Wednesday after a record fall, Credit Suisse was worth barely 7 billion Swiss francs (about as many euros), a misery for a bank which is part – like UBS – of the 30 establishments around the world that are considered too important to allow them to fail.
But according to the Financial Times and Blick, the bank’s customers withdrew 10 billion Swiss francs in deposits in a single day late last week. A tangible sign of distrust of the establishment.
– Public guarantees –
According to the Bloomberg agency, UBS demands that the public authorities bear legal costs and potential losses which can amount to billions of 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 focus on 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 expecting “substantial” losses in 2023.
This 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.
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.
– What about the Competition Commission? –
Credit Suisse has just experienced two years marked by several scandals which revealed, by management’s own admission, “substantial weaknesses” in its “internal control”.
In front of the headquarters of Credit Suisse in Zurich, March 18, 2023 (AFP / Fabrice COFFRINI)
The federal financial market supervisory authority (Finma) accused him of having “seriously breached his prudential obligations” in the bankruptcy of the financial company Greensill which marked the beginning of his setbacks.
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.
The Competition Commission could also raise eyebrows depending on the configuration of the takeover.
– Faster, stronger –
At the end of October, Credit Suisse had unveiled a vast restructuring plan providing for the elimination of 9,000 positions by 2025, or more than 17% of its workforce.
The bank, which employed 52,000 people at the end of October, plans to separate investment banking from the rest of its activities to refocus on its most stable parts, including wealth management.
But as Blick points out: “Everything points to a Swiss solution this Sunday. And when the stock market opens on Monday Credit Suisse could be a thing of the past.”
© 2023 AFP
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