(Zurich) Credit Suisse, the second largest bank in the country, must find ways to reassure the markets at all costs before they open on Monday morning, and its great rival UBS is emerging as the saviour, according to the press.
Silence dominates on Saturday both on the side of Credit Suisse and UBS, the number one Swiss bank which is presented as the buyer of choice in the eyes of the central bank and the financial market policeman.
The Swiss market opens at 4:00 a.m. (Eastern time) on Monday and if nothing convinces investors that a good solution is found for an establishment that is considered a weak link, it may have an even worse day. as Wednesday, March 15.
The stock had hit an all-time low of 1.55 Swiss francs (around C$2.30) and at the close Credit Suisse’s market valuation was just CHF 7 billion, a straw for a bank that is part of — all like UBS — of the 30 institutions in the world too big to let them fail.
Public guarantees
So how to reassure? Friday evening, the FinancialTimes opened the ball saying that UBS was in talks for the total or partial takeover of its rival.
The Swiss central bank (SNB) “wants a simple solution before the markets open on Monday”, assures the business daily, adding that it is not certain that an agreement can be found.
According to the Bloomberg agency, which cites anonymous sources, UBS is demanding that the public authorities bear legal costs and potential losses.
One of the scenarios under study would be a takeover of Credit Suisse to retain only asset and wealth management and resell the investment banking part, indicates the financial agency.
Discussions are continuing on the fate of the Swiss branch of Credit Suisse. It is profitable, unlike the group which lost 7.3 billion Swiss francs last year and expects “substantial” losses again this year.
This branch brings together retail banking and loans to SMEs and another scenario mentioned by analysts in recent days would be to list it on the stock exchange, which could make it possible to avoid massive layoffs in Switzerland due to duplication with activities from UBS.
On Wednesday, the mistrust of investors and partners forced the central bank to lend 50 billion Swiss francs (more than 74 billion Canadian dollars) to restore oxygen to the Zurich establishment and reassure the markets.
The respite was short-lived: buying the bank would not be expensive today, but an acquisition of this size is of formidable complexity, especially when it is done in a hurry.
Redemption but of what?
Credit Suisse has just experienced two years marked by several scandals, which revealed, by management’s own admission, “substantial weaknesses” in its “internal control”. Finma had accused him of having “seriously breached his prudential obligations” in the bankruptcy of the financial company Greensill, which marked the beginning of his setbacks.
UBS, which spent several years recovering from the shock of the 2008 financial crisis, is beginning to reap the rewards of its efforts and again on Wednesday its chief executive Ralph Hamers made it clear that he wanted to focus on the strategy of the bank and refused to answer a “hypothetical” question about a takeover of Credit Suisse.
The Competition Commission could also raise eyebrows depending on the configuration of a takeover.
PHOTO FABRICE COFFRINI, AGENCE FRANCE-PRESSE ARCHIVES
Faster, stronger
At the end of October, Credit Suisse unveiled a vast restructuring plan including the elimination of 9,000 positions by 2025, or more than 17% of its workforce.
The bank, which employed 52,000 people at the end of October, intends to refocus on its most stable activities and radically transform its business banking.
Much of the investment banking business, which suffered heavy losses, is to be consolidated under the First Boston brand and then outsourced.
But Morningstar analysts consider the restructuring both “too complex” and not thorough enough.
Analysts at US bank JP Morgan are considering a drastic option: for Credit Suisse to “completely” shut down its investment banking business.
