UBS AG was up against the clock yesterday in talks to finalize a mammoth takeover of its troubled rival, Credit Suisse Group AG and reassure investors before the markets reopen.
UBS, Switzerland’s largest bank, was urged by authorities finalize a deal to avoid a wave of panic on the markets today.
The Swiss nation’s two largest banks were in urgent negotiations this weekend with the country’s banking and regulatory authorities, several media outlets reported.
Photo: EPA-EFE
The generally well-informed tabloid Blick said UBS was about to purchase Credit Suisse in a deal to be finalized during an exceptional meeting in Bern, Switzerland, bringing together the Swiss government and the banks’ executives.
A merger of this scale, involving swallowing up all or part of a bank arousing growing investor unease, would normally take months. UBS has only had a few days.
However, Swiss authorities told Blick they had no choice and pushed UBS into overcoming its reluctance due to the enormous pressure exerted by Switzerland’s major economic and financial partners, fearing for their own financial centers.
“Everything points to a Swiss solution this Sunday, and when the stock market opens on Monday, Credit Suisse could be a thing of the past,” the newspaper said, referring to yesterday’s meeting.
UBS is seeking government guarantees of about US$6 billion for a potential takeover of Credit Suisse, a person with knowledge of the discussions said on Saturday.
The guarantees would cover the cost of winding down parts of Credit Suisse and potential litigation charges, the source said.
A second person confirmed this without specifying the US$6 billion figure.
Talks to resolve the crisis of confidence in Credit Suisse are encountering significant obstacles, and 10,000 jobs might need to be cut if the two banks combine, the first source said.
The SonntagsZeitung newspaper called it “the merger of the century.”
“The unthinkable becomes true: Credit Suisse is about to be taken over by UBS,” the weekly said.
The government, the financial market authority and the Swiss National Bank (SNB) “see no other option,” it said.
“The pressure from abroad had become too great — and the fear that the reeling Credit Suisse could trigger a global financial crisis,” it said.
Like UBS, Credit Suisse is one of 30 banks globally deemed to be Global Systemically Important Banks — of such importance to the international banking system that they are deemed too big to fail.
However, market movement suggested the bank was perceived as a weak link in the chain.
“We are now awaiting a definitive and structural solution to the problems of this bank,” French Minister of Finance Bruno Le Maire told Le Parisien. “We remain extremely vigilant.”
The Financial Times said that Credit Suisse customers withdrew 10 billion Swiss francs (US$10.83 billion) in deposits in a single day late last week — a measure of how far trust in the bank has fallen.
After a turbulent week on the stock market, which forced the SNB to step in with a US$54 billion lifeline, Credit Suisse was worth about US$8.7 billion by Friday evening — precious little for a bank considered one of 30 key institutions worldwide.
Amid fears of contagion after the collapse of two banks in the US, Credit Suisse shares closed down 8 percent on Friday at 1.86 Swiss francs as the Zurich-based lender struggled to retain investor confidence.
Credit Suisse has been plagued by a series of scandals in recent years. Shares were worth SF12.78 in February 2021.
The bank suffered a net loss of US$7.9 billion last year and expects a “substantial” pre-tax loss this year.
The notion of Switzerland’s largest banks joining forces has cropped up over the years, but has generally been dismissed due to competition issues and risks to the Swiss financial system’s stability.
“Credit Suisse management, even if forced to do so by the authorities, would only choose [this option] if they have no other solution,” said David Benamou, chief investment officer of Paris-based Axiom Alternative Investments.
The London Metal Exchange (LME) discovered bags of stones instead of the nickel that underpinned a handful of its contracts at a warehouse in Rotterdam, the Netherlands, in a revelation that would deliver another blow to confidence in the embattled exchange. The amount of metal represents just 0.14 percent of live nickel inventories on the LME, worth about US$1.3 million at current prices, so the immediate effect on the metals markets is limited. However, the shock announcement has much wider implications. In an industry riddled with scandals, the LME’s contracts are viewed as unquestionably safe. The news that even a few of
Oil on Friday posted its worst weekly loss since the early months of the COVID-19 pandemic as banking turmoil poisoned investor sentiment. West Texas Intermediate for April delivery dropped 2.36 percent to US$66.74 per barrel, falling 12.96 percent for the week, the largest drop in almost three years. Brent crude for May delivery fell 2.32 percent to US$72.97, posting a weekly loss of 11.85 percent. The failure of Silicon Valley Bank and troubles at Credit Suisse Group AG drove investors from risk assets, with oil-options covering accelerating the sell-off. “Crude action this week reminded many of how quickly the commodity can be decimated by
US-based mobile chip designer Qualcomm Inc yesterday opened a manufacturing engineering and testing center in Hsinchu, expanding its presence in Taiwan. Qualcomm also expects to accelerate its purchases in Taiwan, which already rose to NT$240 billion (US$7.9 billion) last year, up from NT$90 billion five years earlier, and should hit NT$300 billion next year. The center is to provide services for the supply chain in the semiconductor industry, Roawen Chen (陳若文), senior vice president and chief supply chain and operations officer of Qualcomm, said at the facility’s inauguration ceremony. It is Qualcomm’s largest and most advanced engineering testing center outside of the company’s
Huawei Technologies Co (華為) has replaced more than 13,000 parts in its products that were hit by US trade sanctions, the Chinese tech giant’s founder said, according to a speech transcript from last month posted on Friday by a Chinese university. Ren Zhengfei (任正非) said Huawei had over the past three years replaced the 13,000 components with domestic Chinese substitutes, and had redesigned 4,000 circuit boards for its products, the transcript posted by Shanghai Jiao Tong University said. “As of now, our circuit board [production] has stabilized, because we have a supply of domestically produced components,” Ren said. He did not give details
RSS