After Credit Suisse Group AG announced it would borrow CHF 50 billion from the Swiss National Bank, UBS Group AG is reportedly considering acquiring the banking giant. However, UBS is demanding that the government issue a backstop to prevent losses if it acquires Credit Suisse. According to unnamed sources familiar with the matter, UBS, the world’s largest private bank, wants the government to protect the deal.
Credit Suisse’s troubles deepen Amid banking industry challenges, UBS considers a takeover
In today’s banking world, there are all sorts of deals going on behind the scenes. On Friday, it was reportedthat UBS Group AG is in talks to acquire all or part of banking giant Credit Suisse Group AG. According to sources familiar with the talks, the Swiss Financial Market Supervisory Authority (FINMA) and the Swiss National Bank are involved in the talks between UBS and Credit Suisse. The Swiss regulator said the merger, dubbed “Plan A,” is an attempt to strengthen investor and depositor confidence in Credit Suisse. On Thursday, Credit Suisse announced it would borrow 50 billion Swiss francs ($54 billion) from the Swiss National Bank to bolster liquidity.
On Saturday, Bloomberg and several other publicationsreported that merger talks are intensifying and that UBS wants protection against the losses it could face if it acquires Credit Suisse. Bloomberg contributors Jan-Henrik Foerster, Dinesh Nair, Marion Halftermeyer, and Esteban Duarte detailed that UBS is discussing certain scenarios with the Swiss government. According to the source, who asked to remain anonymous, UBS has expressed interest in Credit Suisse’s asset management arm, but the bank wants a government-brokered deal that includes a backstop.
The report further stated that prior to the Swiss government-brokered talks, UBS executives were hesitant to acquire a competing bank and assume the risks associated with Credit Suisse. Sources familiar with the matter told,Credit Suisse Chief Financial Officer Dixit Joshi and his team met over the weekend to discuss the bank’s options, according to Reuters, which reports that in addition to UBS, several other rivals reported interest. This is not the first sign of trouble for the Swiss bank, as Credit Suisse and Deutsche Bank both suffered distressed valuations last October. At that time, the banking giant’s credit default insurance approached 2008 levels.
Credit Suisse’s current problems intensified after the failures of Silvergate Bank, Silicon Valley Bank, and Signature Bank. In addition, 11 lenders injected $30 billion into First Republic Bank last week, preventing the bank’s collapse. In the past seven days, Credit Suisse’sshareshave lost about a quarter o