Last week, things really messed up for the main Swiss bank, Credit Suisse.
It went from problem to crisis, and over the weekend the authorities worked hard to hammer out an agreement to prevent problems at the bank from having serious ripple effects in financial markets.
It became clear, on Sunday evening, that the authorities had succeeded in concluding an agreement whereby UBS would buy the entire stricken Credit Suisse bank for a total of $3.25 billion.
– Federation President Alain Berset said during a press conference on Sunday evening that this acquisition is the best solution to rebuild confidence.
As part of the agreement, the Swiss Central Bank is also providing significant monetary support through a so-called “subsidized liquidity loan” of up to CHF100 billion. “The significant contribution of liquidity will ensure that both banks will have access to the necessary liquidity,” the press release says.
The purchase is settled in UBS shares only, with Credit Suisse shareholders receiving 1 UBS share for 22.48 Credit Suisse shares. And the agreement shifted from the closing price on Friday for the shares of the two banks, as the value of the Credit Suisse agreement as a whole is estimated at three billion Swiss francs, equivalent to 34.6 billion Norwegian kroner.
Admittedly, it is much lower than what Credit Suisse was quoted on the exchange at the close of trading on Friday.
The company’s market capitalization at the end of the trading day on Friday was CHF6.5 billion, which is equivalent to NOK 75 billion.
The latest transaction values Credit Suisse shares at 0.76 Swiss francs. By comparison, the stock was trading on Friday for CHF1.86. Which means billions in shareholder value have been wiped out.
– We regret that Credit Suisse has not been able to solve its problems on its own. It’s particularly sad because several thousand employees have been affected by this, Finance Minister Karen Keller-Sutter said during the news conference.
She thinks it is incomprehensible that a bank like Credit Suisse could end up in such a situation. Credit Suisse is the second largest bank in Switzerland and is now being bought by the country’s largest bank – and its biggest competitor.
Unfortunately, the bank has lost confidence, she added.
Sad day for Credit Suisse
The Chairman of Credit Suisse said it was a sad day for the bank.
– This is a sad day for both Credit Suisse and the global financial market, says Axel P. Lehmann, Chairman of the Board of Directors of the acquiring bank.
He says the events related to the situation in US banks have come at a very unfortunate time. Towards the end of last week, there was a series of bank meltdowns. First, crypto-focused Silvergate collapsed, then US Silicon Valley Bank.
A few days after the unrest began in the United States, it became known that the Swiss Central Bank was forced to intervene and grant Credit Suisse a crisis aid amounting to 50 billion Swiss francs, which is equivalent to about 600 billion Norwegian kroner. On Friday, it was clear that there was not enough confidence in the market, and therefore the acquisition was necessary.
Lehman believes that after the takeover becomes a reality, it will ensure stability and security. Finance Minister Keller Sutter stresses the same, and believes that a possible bankruptcy would have dire consequences for the Swiss financial market with risks of international contagion.
– The United States and the United Kingdom were very grateful for this solution … They were really afraid that Credit Suisse would go bankrupt, as you say.
We welcome the announcements made by the Swiss authorities. Central Bank Governor Jerome Powell and Treasury Secretary Janet Yellen said in a joint statement after announcing the acquisition that financial stability is guaranteed.
Ralph Hammers will become director of the new combined company.
The rules may have changed
Under Swiss rules, UBS normally has to give shareholders six weeks to consult on a takeover, but the authorities wanted to seal the deal before the market opened on Monday.
According to the Sunday evening press release, it appears that exceptions to these rules have been made in order to obtain approval in a timely manner.
Vincent Kaufmann, CEO of Ethos, represents the Swiss pension funds that own between three and five percent of Credit Suisse and UBS. He told the Financial Times that the move to bypass the shareholder vote is an example of corporate mismanagement.
– I can’t believe our members and UBS shareholders would be happy about this, Kaufman tells FT, and adds:
– I have never seen such measures taken before, and this shows how bad the situation is. (conditions)Copyright Dagens Næringsliv AS and/or our suppliers. We’d like you to share our statuses using links that lead directly to our pages. Reproduction or other use of all or part of the Content may be made only with written permission or as permitted by law. For more terms see here.
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