(Updates with details, graphic)
BERN, March 19 (Reuters) - UBS agreed to buy
rival Swiss bank Credit Suisse for 3 billion Swiss
francs ($3.23 billion) in stock and agreed to assume up to 5
billion francs ($5.4 billion) in losses, in a shotgun merger
engineered by Swiss authorities to avoid more market-shaking
turmoil in global banking.
The deal includes 100 billion Swiss francs ($108 billion) in
liquidity assistance for UBS and Credit Suisse from the Swiss
central bank.
To enable UBS to take over Credit Suisse, the federal
government is providing a loss guarantee of a maximum of 9
billion Swiss francs for a clearly defined part of the
portfolio, the government said.
This will be activated if losses are actually incurred on
this portfolio. In that eventuality, UBS would assume the first
5 billion francs, the federal government the next 9 billion
francs, and UBS would assume any further losses, the government
said.
Switzerland's regulator FINMA said that there was a risk
that Credit Suisse could have become "illiquid, even if it
remained solvent, and it was necessary for the authorities to
take action".
Credit Suisse Additional Tier 1 shares with a nominal value
of around 16 billion francs ($17.2 billion) will be written down
completely after the Swiss government provided support for UBS'
takeover of Credit Suisse, FINMA said.
The 167-year-old Credit Suisse has been the biggest name
ensnared in market turmoil unleashed by the recent collapse of
U.S. lenders Silicon Valley Bank and Signature Bank, forcing it
to tap $54 billion in central bank funding last week.
"With the takeover of Credit Suisse by UBS, a solution has
been found to secure financial stability and protect the Swiss
economy in this exceptional situation," the Swiss central bank
said.
Authorities had been scrambling to rescue Credit Suisse,
among the world's largest wealth managers, before financial
markets reopened on Monday.
UBS and Credit Suisse are both in a group of the 30 global
systemically important banks watched closely by regulators, and
Credit Suisse's failure would ripple throughout the entire
financial system.
The announcement came in a make-or-break weekend after some
rivals grew cautious in their dealings with the struggling Swiss
lender, and its regulators urged it to pursue a deal with UBS.
FINMA, which said it had approved the takeover, said recent
measures to stabilize itself were "not enough to restore
confidence in the bank, however, and more far-reaching options
were also examined."
The two banks' fortunes have diverged sharply over the past
year. UBS earned $7.6 billion in profit in 2022, while Credit
Suisse lost $7.9 billion. Credit Suisse's shares are down 74%
from a year ago, while UBS's are relatively flat.
The Swiss government said that it was also giving UBS a
guarantee of 9 billion Swiss francs "assume potential losses"
from assets as part of the transaction.
UBS's chief executive officer Ralph Hamers and Chairman Colm
Kelleher will remain at the helm of the combined bank.
"The transaction reinforces UBS's position as the leading
universal bank in Switzerland," UBS said.
Executives foreshadowed structural changes in the offing.
Kelleher said it would wrap up running Credit Suisse's
investment bank, but added that it was too early to say anything
about potential job cuts.
Kelleher also said they would keep Credit Suisse's domestic
business, despite speculation that it could be spun off amid
competition concerns.
Credit Suisse's Chairman Axel Lehmann called the merger the
"best available outcome".
($1 = 0.9280 Swiss francs)
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Tale of two banks Tale of two banks ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
(Reporting by John Revill, Noele Illien, John O'Donnell, Oliver
Hirt and Tom Sims; Editing by Riham Alkousaa, Paul Carrel and
Hugh Lawson)
Messaging: john.revill.thomsonreuters.com@reuters.net))
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