The Swiss government is close to announcing a deal that would involve UBS buying Credit Suisse, its smaller and embattled rival, for around $1 billion, three people with knowledge of the matter said on Sunday.
The Credit Suisse acquisition is the biggest fallout to date from the turmoil that swept over the Silicon Valley Bank implosion earlier this month. But Credit Suisse’s troubles were largely of its own making, tied to years of scandals and financial missteps that have cost it billions of dollars in business losses and legal fines.
Not even a $54 billion lifeline from the Swiss National Bank, announced last week, could stop the erosion of investor confidence that plunged Credit Suisse shares to record lows. Talks between Credit Suisse and the much stronger UBS intensified over the past week as Swiss banking authorities tried to prevent a chaotic dissolution of Credit Suisse.
Under the terms of the proposed deal, UBS will pay only a fraction of the roughly 8.8 billion Swiss francs, or $9.5 billion, at which Credit Suisse was valued on Friday, these people said. They warned that the terms are still being negotiated at the last minute and that the talks may still fall apart.
Representatives for Credit Suisse and the Swiss National Bank declined to comment, while those for UBS and Finma, the Swiss financial regulator, could not immediately be reached.
The Swiss government is expected to allow circumvention of some financial rules, notably a six-week consultation period with UBS shareholders before any transaction can be approved.
The potential move represents the dismantling of a 166-year-old institution created to finance Switzerland’s rail network that rose to the highest levels of finance, sometimes going toe-to-toe with American titans like JPMorgan Chase. But Credit Suisse has been plagued by scandals over the years, from money laundering to misguided business bets, that have left it reeling from losses and damaged its reputation.
The bank had been struggling to recover in recent months, but two events last week contributed to Credit Suisse’s slide. First, the bank revealed on Tuesday that there were “material weaknesses” in its financial reports. And second, it was swept up in the widespread and intensifying panic surrounding the health of banks: as shares of lenders around the world plunged following the collapse of Silicon Valley Bank and Signature Bank, markets they became especially wary of Credit Suisse.
Credit Suisse share and bond prices fell sharply throughout the week, as did the cost of insuring its debt against default, despite efforts by Swiss regulators to shore up investor confidence. On Thursday, Credit Suisse said it would take advantage of a $54 billion lifeline from the Swiss central bank in the hope of averting disaster.
Details of the proposed transaction with UBS were previously reported by financial time.
This is a developing story. Please check back for updates.
