Struggling Swiss banking giant Credit Suisse has agreed to be bought by its arch-rival UBS at a discount to Friday’s close price, after seeing a wave of customer deposits exit the bank.
The deal was announced by Switzerland’s president, Alain Berset, flanked by executives from both banks and the chairman of the Swiss National Bank.
“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 SNB said in a statement.
UBS
UBS,
will buy Credit Suisse
CS,
for more than $2 billion in an all-stock deal, the Financial Times reported, citing people with direct knowledge of the transaction. Bloomberg News reported the same deal terms.
The 0.50 francs per share UBS is offering, in stock, compares to Credit Suisse’s
CSGN,
closing price of 1.86 francs on Friday. The FT said UBS initially bid just 0.25 francs per share.
The Swiss National Bank said either UBS or Credit Suisse can borrow up to 100 billion francs in a liquidity assistance loan, and Credit Suisse can also receive a liquidity assistance loan of up to 100 billion francs. backed by a federal default
guarantee.
The Federal Reserve has been working with its Swiss counterpart on the deal, as both banks have major operations in the U.S.
Karin Keller-Sutter, the Swiss finance minister, said she held talks with U.S. Treasury Secretary Janet Yellen and U.K. Chancellor Jeremy Hunt.
Credit Suisse’s downfall occurred just days after the collapse of U.S. banks SVB Financial and Signature Bank. While Credit Suisse, as well as Swiss authorities, said they didn’t have the same kinds of problems, they also saw customers leave. After wealthy clients withdrew roughly $100 billion from Credit Suisse in the fourth quarter, they again began to see big outflows last week, the FT reported.
Credit Suisse has lost money for five consecutive quarters, reeling from losses to family office Archegos as well as having to freeze $10 billion of supply chain funds sold through the bank that were managed by Greensill Capital.