Credit Suisse: find out the main points of the purchase by UBS – 03/20/2023 – Market

UBS’ purchase of Credit Suisse will create a banking giant unprecedented in the history of Switzerland, a country where banking is an integral part of the national identity.

Next, the main points of the 3 billion Swiss francs (US$ 3.25 billion, about R$ 17 billion) agreement concluded on Sunday (19), after intense negotiations involving the government, financial regulators and the central bank.

Preserve financial stability

Credit Suisse, Switzerland’s second-biggest bank, has been in turmoil for two years and is one of 30 financial institutions considered too big to fail.

“Its fate is therefore decisive not only for Switzerland, for our companies, private customers, their employees, but for the stability of the entire financial system,” declared Swiss President Alain Berset, as he presented the agreement.

Finance Minister Karin Keller-Sutter said the bankruptcy of Credit Suisse would have caused irreparable economic turmoil and that, for that reason, Switzerland must take responsibility beyond its borders.

“UBS’ purchase of Credit Suisse laid the foundation for greater stability in Switzerland and internationally,” he added.

Colossus in wealth management

“The combination of the two banks strengthens UBS’s position as a world leader in wealth management, with more than $5 trillion invested in assets in the most attractive growth markets,” said the president. of the board of UBS, Colm Kelleher.

“It also strengthens UBS’s position as the leader in universal banking in Switzerland and extends our position as the leading Swiss global bank,” he added.

“The combination of the two businesses is expected to generate an annual cost reduction of more than US$ 8 billion (about R$ 42 billion) until 2027”, UBS said in the statement.

No shareholder vote

Shareholders will receive one UBS share for every 22.48 Credit Suisse shares they own, equivalent to CHF 0.76 per share, down from Friday’s closing price of CHF 1.86.

However, this purchase will not be subject to a shareholder vote, as agreed with the Swiss and other regulatory authorities.

The Competition Commission will also have no say in the exceptional merger between Switzerland’s two biggest banks.

protected deposits

“The merger is expected to be completed by the end of 2023, if possible,” Credit Suisse said in a statement.

Meanwhile, Credit Suisse will continue the implementation of its restructuring program “in collaboration with UBS”.

Finma, the Swiss financial regulator, said all bank services would continue without interruption.

“This guarantees the protection of account holders whose accounts, security accounts and other services (ATM, online banking, debit and credit cards) will continue to be available”, he indicated.

jobs

UBS will take over the wealth management, asset management and Swiss national bank from Credit Suisse, including retail banking services and lending to small and medium-sized businesses.

“UBS intends to scale down Credit Suisse’s investment banking business and bring it in line with our conservative risk culture,” Kelleher said, referring to one of the riskier aspects of Credit Suisse’s portfolio.

But neither Kelleher nor Credit Suisse Chairman Axel Lehmann provided details on possible job cuts, although they want to keep the period of uncertainty as short as possible.

Liquidity

To facilitate the deal, the Swiss government granted UBS a CHF 9.9 billion guarantee to cover potential losses on certain assets it will absorb.

The Swiss National Bank (central bank) will also provide support to the two banks in the form of liquidity of up to CHF 100 billion.