Financial stock markets falling by more than 3%, completely feverish markets and one of the largest European banks in difficulty after the bankruptcy of SVB, in the United States, on March 10. Credit Suisse, the second Swiss bank, was acquired by its rival UBS this Sunday, March 19, confirmed the two entities concerned and the government. The latter is betting on this merger to “restore confidence”.
Pushed by authorities meeting urgently on several occasions in recent days, UBS has agreed to pay more than two billion dollars to acquire Credit Suisse. She doubled in extremis a first proposal, according to Financial Times, in order to overcome the reluctance of its competitor and one of its main shareholders, and, above all, to prevent a panic movement on the markets on Monday. Still according to the specialized daily, the transaction would be made only in UBS shares and would value the Credit Suisse share at a price of 50 cents, instead of the 25 initially proposed – which remains much lower than the share price on Friday at the close (1. 86 francs).
After a record fall at the close of trading on March 15, Credit Suisse was worth barely 7 billion Swiss francs (about as many euros). A misery for a bank which is one – like UBS – of the 30 establishments in the world considered too important to let them fail. Faced with the distrust of investors and partners, the Swiss Central Bank immediately lent 50 billion Swiss francs to breathe new life into Credit Suisse and reassure the markets. But the respite was only short-lived.
According to Bloomberg, another scenario was once considered: a partial or total nationalization of Credit Suisse. According to the specialized media, which cites people familiar with the matter, it was the only viable option apart from a takeover by UBS. “The country is considering either taking over the bank in its entirety or having a significant stake if a takeover by UBS collapses due to the complexity of closing the deal and the short timeline,” they said. they said, asking not to be identified because “the matter is private”.
Two black years
Credit Suisse has just experienced two years marked by several scandals which revealed, by management’s own admission, “substantial weaknesses” in its “internal control”. The federal financial market supervisory authority (Finma) accused him of having “seriously breached his prudential obligations” in the bankruptcy of the financial company Greensill in 2021, which marked the start of his setbacks. At the end of October 2022, Credit Suisse had unveiled a vast restructuring plan providing for the elimination of 9,000 positions by 2025, or more than 17% of its workforce. The bank, which employed 52,000 people at that time, now plans to separate investment banking from the rest of its activities to refocus on its most stable areas, including wealth management.
By contrast, UBS, which spent several years recovering from the shock of the 2008 financial crisis, is beginning to reap the rewards of its efforts. Regarding the acquisition of Credit Suisse, it would require state guarantees to cover the costs of the liquidation of certain parts of the Zurich bank, as well as the potential costs of litigation. UBS would like around $6 billion, Reuters news agency said on Saturday evening, citing sources familiar with the ongoing talks. The amount advanced could still change. The discussions also come up against the question of jobs: a merger between UBS and Credit Suisse could lead to the elimination of around 10,000 jobs.
“French banks are solid”
In France, the president of the French Banking Federation Philippe Brassac assured that the banking turmoil which is hitting Credit Suisse in particular in Europe was not likely to contaminate the banking sector. “There is no risk because there is no possible contagion mechanism between the events we are seeing and the French banks,” said the banker, managing director of Crédit Agricole, on France Inter. “French banks are very solid due to regulation”, and “there is no mechanism, as there could be in the past, for propagation.”
“French banks are solid,” repeated French Economy Minister Bruno Le Maire. “Savers have no need to worry about their deposits. We have in Europe the most demanding banking supervision system on the planet,” he said in an interview at Parisian, SATURDAY.