Swiss authorities pushing UBS takeover of Credit Suisse for just $1B: FT
The Financial Times is reporting over the weekend that a merger of Switzerland’s two largest banks is being hastily negotiated over the weekend, with UBS (NYSE:UBS) offering to take over its troubled rival Credit Suisse (NYSE:CS) for just $1 billion.
The action over the weekend, being shepherded by the Swiss National Bank and financial regulator FINMA, comes after a CHF 50 billion (USD $54 billion) covered credit facility offered to Credit Suisse last week by the SNB failed to stop a collapse in Credit Suisse’s share price, or apparently the exodus of more customer deposits. It also comes in the shadow of the failure last weekend of two not-inconsequential banks in the US, Silicon Valley Bank and Signature Bank.
Credit Suisse’s problems are not really new, with the bank basically seeing a more than 10-year steady decline in its share price, from a post 2008-2009 financial crisis high of $52 (in late 2009) to just $2.01 at Friday’s close. CS shares were down 24% last week alone. Credit Suisse reported a net loss of CHF 7.3 billion in 2022, and had already indicated that losses will continue into 2023.
Credit Suisse share price past 5 years. Source: Google Finance.
The FT is reporting that UBS is offering just CHF 0.25 per share for Credit Suisse, which would value the company at about USD $1 billion – only one-seventh of its current $7 billion market capitalization based on the aforementioned $2.01 Friday close. The offer is for UBS stock, not for cash, and would effectively all but wipe out Credit Suisse shareholders, while saving the bank’s operations (at least those that UBS would keep) and avoid what would likely be a big international financial mess were Credit Suisse to actually fail.
While Credit Suisse is reportedly balking at the (low-ball) UBS offer, Swiss regulators and Government officials in the Finance ministry are working in the background to get the deal done before Monday morning. That would require a change in Swiss banking law by allowing for an immediate takeover, bypassing a six-week mandatory review of such a deal by UBS shareholders before voting to approve or disapprove.
The concern seems to be that there might not be much left of Credit Suisse if a takeover isn’t done immediately. Credit Suisse reported that in Q4-2022 it saw CHF 111 in deposit withdrawals – about a third of its total deposits – which have continued into 2023. Last week Credit Suisse was reportedly facing CHF 10 billion in daily withdrawals.
The FT, citing “four people with direct knowledge of the situation”, described the overall situation as “fast-moving”, with no guarantee that terms will remain the same or that a deal will indeed be reached.