UBS in talks to acquire embattled Credit Suisse: Financial Times

GENEVA – Switzerland’s largest bank, UBS, is in talks to buy all or part of Credit Suisse, according to a report by the Financial Times.

Credit Suisse – Switzerland’s second-biggest bank – came under pressure this week as the failure of two US regional lenders rocked the sector. By the close of markets yesterday, its shares had dropped 8%.

The Swiss National Bank (SNB) and financial markets watchdog Finma told their US and British counterparts their “plan A” to stop the crisis of confidence facing Credit Suisse was to merge it with UBS, the FT reported yesterday, citing unnamed sources.

The Swiss central bank “wants the lenders to agree on a simple and straightforward solution before markets open on Monday”, the source said, while acknowledging there was “no guarantee” of a deal.

UBS wants to assess what risks a full or partial takeover of its rival could pose to its own business, another source told the FT.

When reached, both SNB and Credit Suisse declined to comment, while UBS and Finma did not respond immediately.

Credit Suisse, which has been in turmoil for two years, has been seen as a weak link in the banking sector due to a series of scandals and a major restructuring programme launched last October.

Its market value took a heavy blow this week over fears of contagion from the collapse of two US banks – Silicon Valley Bank and Signature Bank – along with the publication of its annual report, which cited “material weaknesses” in internal controls.

But shares nosedived to historic lows Wednesday after its main shareholder, Saudi National Bank, said it would not raise its stake in the group due to regulatory constraints.

By Wednesday evening, SNB had stepped in with a US$53.7 billion (RM241 billion) lifeline to reinforce the group.

The idea of a takeover by UBS was also floated this week by analysts at JP Morgan, calling it “the most likely” scenario.

The idea of Switzerland’s biggest banks joining forces regularly resurfaces but is generally dismissed due to competition issues and risks to the Swiss financial system’s stability, given the size of the bank that would be created by such a merger. – AFP, March 18, 2023