UBS agreed to buy Credit Suisse for €3.013 billion after a frantic weekend of negotiations brokered by Swiss regulators to safeguard the country’s banking system and attempt to prevent a crisis spreading across global markets.
The historic deal follows five days in which the Swiss establishment raced to end a deepening crisis at Credit Suisse that threatened to topple the country’s second-largest lender. An emergency SFr50bn (€50 billion) credit line provided by the Swiss National Bank on Wednesday failed to arrest a steep decline in the bank’s share price, which was exacerbated by wider market turmoil caused by the sudden collapse of California-based Silicon Valley Bank earlier this month.
UBS will pay about SFr0.76 a share in its own stock, worth SFr3bn, up from a bid of SFr0.25 earlier on Sunday worth about €1 billion that was rejected by the Credit Suisse board. However, the offer remains far below Credit Suisse’s closing price of SFr1.86 on Friday.
As part of the deal, the SNB has agreed to offer a SFr100bn liquidity line backed by a federal default guarantee to UBS, the Swiss finance ministry said. The government is also providing a loss guarantee of up to SFr9bn, but only after UBS has borne the first SFr5bn of losses on certain portfolios of assets. The combination creates one of the biggest banks in Europe. UBS has €1.019 trillion of total assets on its balance sheet and Credit Suisse has €533 billion.
Soruce: ft.com on the 19th of March
https://www.ft.com/content/9fe40e6a-f01f-4205-b885-7771d305721e