(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 and its great rival UBS is emerging as the saviour, according to media reports.
According to the Financial Times daily, which as of Friday evening had affirmed that UBS was in the running for the takeover of Credit Suisse under pressure from the Swiss regulatory authorities, an agreement could be reached as early as Saturday evening.
Hurry up. The Swiss market opens at 4:00 a.m. EST 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 then hit a historic low of 1.55 Swiss francs (about 2.30 Canadian dollars) and at the close Credit Suisse’s market valuation was just CHF 7 billion, a straw for a bank that is part of the — so does UBS — of the 30 institutions in the world that are too big to fail.
According to the Financial Times, citing two unnamed sources, Credit Suisse customers withdrew 10 billion francs in deposits in a single day late last week.
So how to reassure?
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 continue 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 breathe new life into the Zurich establishment and reassure the markets.
Credit Suisse has just experienced two years marked by several scandals which revealed, by management’s own admission, “substantial weaknesses” in its “internal control”. The Federal Financial Market Supervisory Authority (FINMA) accused him of having “seriously breached his prudential obligations” in the bankruptcy of the financial company Greensill, which marked the beginning of his troubles.
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 Credit Suisse takeover.
The Competition Commission might also raise eyebrows depending on how a takeover is set up.
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 investment 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 call the restructuring both “too complex” and not deep enough.
Analysts at US bank J.P. Morgan are considering a drastic option: for Credit Suisse to “completely” shut down its investment banking business.