O UBS made official, this Sunday, the offer to buy the Credit Suisse for up to $1 billion. According to information from the Financial Times, the agreement should be closed this Sunday.
With that, the UBS would pay CHF 0.25 per share. On Friday, shares of the credit closed at CHF 1.86.
The news that the UBS could buy the bank came out on Friday.
Credit Suisse, with 167 years of existence, is the biggest name involved in the market turmoil triggered by the collapse of US banks Silicon Valley Bank It is Signature Bank last week, during which the Swiss bank lost a quarter of its market value.
To control the crisis, the UBS is under pressure from Swiss authorities to undertake a takeover of its local rival, two people with knowledge of the matter told Reuters.
The plan could see the Swiss government provide a guarantee against the risks involved, while Credit Suisse’s Swiss businesses could be spun off.
Financial giant of the United States, the blackrock said it has no plans or interest in a rival bid for Credit Suissewhile the Bloomberg reported that the Deutsche Bank was looking into the possibility of buying some of the bank’s assets.
How big is Credit Suisse’s problem?
Credit Suisse’s problems didn’t come out of nowhere. The Swiss bank, together with the Deutsche Bank and some Italian banks, carries risks since the end of the last global financial crisis, which hit Europe hardest between 2011 and 2012.
The bank’s swollen structure, based on assets of low liquidity, would put Credit Suisse in a delicate situation in case of any bank run. A series of rumors about the bank’s financial health released over the past year provided the exact conditions for this to happen.
“A rumor is all it takes to break a bank”, comments William Castro Alves, Avenue’s chief strategist. In 2022 alone, Credit Suisse shares traded in New York plunged 30%; in 5 years, this drop is 80%. Today the institution has a market value of US$ 10 billion.
To try to contain the bloodletting surrounding the withdrawal of resources, the executive board rushed to the market in search of a capitalization, promising a restructuring plan and greater rigidity in the rules of compliance.
And it did. With help from the SNB, Credit raised $4.2 billion, helping to allay market concerns. But any tranquility came crashing down with the ‘twin’ collapse of the SVB and the Signature last weekend, ultimately generated by issues similar to those facing the Swiss.
“If the bank does not reverse the outflows of resources, and does not restore the amount of assets under management, the adverse effect could lead to a more extreme situation”, assesses Avenue’s chief strategist. Castro Alves also points out that the bank’s liquidity remains close to or even below levels established by regulators.
With Reuters and Jorge Fofano
I am an author and journalist with a focus on market news. I have worked for a global news website for the past two years, writing articles on a range of topics relating to the stock market. My work has been published in international publications and I have delivered talks at both academic institutions and business conferences around the world.