UBS close to finalizing deal for Credit Suisse
UBS (UBSG.S) is close to finalizing a deal to buy rival Swiss bank Credit Suisse (CSGN.S), a source familiar with the matter said on Sunday.
The deal is valued at more than $2 billion, after UBS increased its offer, the Financial Times earlier reported. The Credit Suisse chair declined to comment when reached on his cell phone.
The Swiss National Bank agreed to offer a $100 billion liquidity line to Credit Suisse, the FT said. UBS will pay more than 0.50 francs ($0.5401) a share in its own stock, far below Credit Suisse’s closing price of 1.86 francs on Friday, it reported, citing sources.
A news conference was set for 1830 GMT (2:30 p.m. ET).
Officials have been racing to rescue the 167-year-old bank, among the world’s largest wealth managers, after a brutal week saw the second- and third-largest U.S. bank failures in history. As one of 30 global banks seen as systemically important, a deal for Credit Suisse could ripple through global financial markets.
At least two major banks in Europe are examining scenarios of contagion possibly spreading in the region’s banking sector and looking to the Federal Reserve and the European Central Bank to step in with stronger signals of support, two senior executives with knowledge of the discussions said.
The weekend negotiations follow efforts in Europe and the United States to support the sector since the collapse of U.S. lenders Silicon Valley Bank and Signature Bank. U.S. President Joe Biden’s administration moved to backstop consumer deposits while the Swiss central bank lent billions to Credit Suisse to stabilise its balance sheet.
The fallout from the crisis of confidence in Credit Suisse and the failure of the two U.S. banks could ripple through the financial system next week, the two executives separately told Reuters on Sunday.
A person with knowledge of the talks earlier told Reuters that UBS sought $6 billion from the Swiss government as part of a purchase.
The guarantees would cover the cost of winding down parts of Credit Suisse and potential litigation charges. One source previously said 10,000 jobs may have to be cut if the two banks combined.
Credit Suisse shares lost a quarter of their value last week. The bank was forced to tap $54 billion in central bank funding as it tries to recover from scandals that have undermined the confidence of investors and clients.
Swiss authorities are examining imposing losses on Credit Suisse bondholders as part of a rescue of the bank, two sources with knowledge of the matter said on Sunday.
However, European regulators are apprehensive about such a move for fear that it could hit investor confidence elsewhere in Europe’s financial sector, the sources said, speaking on the condition of anonymity.
U.S. authorities are working with their Swiss counterparts to help broker a deal, Bloomberg reported, while Sky News said the Bank of England has indicated to international counterparts and to UBS that it would back the proposed takeover of Credit Suisse, which counts Britain as a key market.