UBS to buy Credit Suisse in deal to end crisis

UBS to buy Credit Suisse in deal to end crisis
The Swiss bank is reportedly paying more than $2 billion for its rival in an all-share deal priced at a fraction of Credit Suisse's close on Friday.
MAR 19, 2023
By  Bloomberg

UBS Group agreed to buy Credit Suisse Group in a historic, government-brokered deal aimed at containing a crisis of confidence that threatened to spread across global financial markets. 

The Swiss bank is paying more than $2 billion for its rival, according to people with knowledge of the matter. It will be an all-share deal and priced at a fraction of Credit Suisse’s close on Friday, when the bank was valued at about 7.4 billion francs ($8 billion). The people asked not to be identified because the deal isn’t public yet.

The Swiss National Bank has agreed to offer a $100 billion liquidity line to UBS as part of the deal, according to the Financial Times, which reported the agreement first. Swiss authorities are poised to change the country’s laws to bypass a shareholder vote, the paper reported, citing people close to the matter.

Representatives for the two banks declined to comment.

The plan, negotiated in hastily arranged crisis talks over the weekend, seeks to address a massive rout in Credit Suisse’s stock and bonds over the past week following the collapse of smaller U.S. lenders. A liquidity backstop by the Swiss central bank midweek failed to end a market drama that threatened to send clients and counterparties fleeing, with potential ramifications for the broader industry.

U.S. authorities have been working with their Swiss counterparts because both lenders have operations in the U.S. and are considered systemically important in Switzerland, Bloomberg reported earlier. Authorities sought an agreement before markets opened again in Asia.

UBS had earlier tabled an offer of about $1 billion, or 0.25 francs a share, for Credit Suisse, which the firm had pushed back on, people with knowledge of the matter said earlier on Sunday. 

UBS agreed to a softening of a material adverse change clause that would void the deal if its credit default spreads jump, the FT also reported people familiar with the matter as saying. The material adverse change clause applies for the period between the signing and closing of the deal, the people said.

The takeover of the 166-year-old lender marks a historic event for the nation and global finance. The former Schweizerische Kreditanstalt was founded by industrialist Alfred Escher in 1856 to finance the build-out of the mountainous nation’s railway network. It had grown into global powerhouse symbolizing Switzerland’s role as a global financial center, before struggling to adapt to a changed banking landscape after the financial crisis.

UBS traces its roots back through some 370 separate institutions over 160 years, culminating in the merger of the Union Bank of Switzerland and the Swiss Bank Corp. in 1998. After emerging from a state bailout during the 2008 financial crisis, UBS built a reputation as one of the world’s largest wealth managers, catering to high- and ultra-high net worth individuals globally.

While Credit Suisse avoided a bailout during the financial crisis, it has been hammered over recent years by a series of blowups, scandals, leadership changes and legal issues. Clients had pulled more than $100 billion of assets in the last three months of last year as concerns mounted about its financial health, and the outflows continued even after it tapped shareholders in a 4 billion-franc capital raise.

Why flexibility remains essential when it comes to retirement spending

Latest News

Northern Trust names new West Region president for wealth
Northern Trust names new West Region president for wealth

The new regional leader brings nearly 25 years of experience as the firm seeks to tap a complex and evolving market.

Capital Group extends retirement plan services further with a focus on advisors
Capital Group extends retirement plan services further with a focus on advisors

The latest updates to its recordkeeping platform, including a solution originally developed for one large 20,000-advisor client, take aim at the small to medium-sized business space.

Why RIAs are the next growth frontier for annuities
Why RIAs are the next growth frontier for annuities

David Lau, founder and CEO of DPL Financial Partners, explains how the RIA boom and product innovation has fueled a slow-burn growth story in annuities.

Supreme Court slaps down challenge to IRS summons for Coinbase user data
Supreme Court slaps down challenge to IRS summons for Coinbase user data

Crypto investor argues the federal agency's probe, upheld by a federal appeals court, would "strip millions of Americans of meaningful privacy protections."

Houston-based RIA Americana Partners adds $1B+ with former Morgan Stanley director
Houston-based RIA Americana Partners adds $1B+ with former Morgan Stanley director

Meanwhile in Chicago, the wirehouse also lost another $454 million team as a group of defectors moved to Wells Fargo.

SPONSORED How advisors can build for high-net-worth complexity

Orion's Tom Wilson on delivering coordinated, high-touch service in a world where returns alone no longer set you apart.

SPONSORED RILAs bring stability, growth during volatile markets

Barely a decade old, registered index-linked annuities have quickly surged in popularity, thanks to their unique blend of protection and growth potential—an appealing option for investors looking to chart a steadier course through today's choppy market waters, says Myles Lambert, Brighthouse Financial.