(Bern) Switzerland’s largest bank UBS, pushed by the authorities, is ready to buy its rival Credit Suisse but at only a fraction of its value, according to the Financial Times. But time is running out to avoid a debacle and a wave of contagious panic on the markets on Monday.
According to the British daily, UBS would be ready to pay only 1 billion dollars. An offer rejected by Credit Suisse with the support of its main shareholder the Saudi National Bank, according to Bloomberg.
The transaction would be made only in shares, explains the Financial Times at a price of 25 cents per Credit Suisse share, when it was still worth 1.86 francs at the close on Friday, for a total valuation of just under 9 billion.
The transaction has been examined in Bern by the federal government since the beginning of the morning, already meeting urgently on Thursday and Saturday.
According to the tabloid Blick, it is in the federal capital that the agreement must be sealed again this Sunday during an extraordinary meeting of federal advisers and leaders of the two banking giants.
The merger between these banking giants, which are both part of the very exclusive club of 30 banking establishments that are too important for the global financial system to let them sink, must in any case be finalized before the opening of the Stock Exchange at 4 a.m. ( Eastern time) Monday, to avoid a wave of panic.
The Swiss authorities have constantly pushed UBS to overcome its reluctance, because they themselves are subject to an obligation of results by partners who fear for their own financial center, says the Swiss daily Blick.
Bank managers should also be exempted from the obligation to consult shareholders, says the Financial Times.
According to the Bloomberg agency, UBS is demanding that the public authorities bear legal costs and potential losses that can amount to billions of francs.
On Saturday, the discussions stumbled on the investment bank, according to the financial agency, one of the scenarios being studied being a recovery only of asset and wealth management with a sale of the investment bank.
The discussions also focus on the fate of the Swiss branch of Credit Suisse, one of the profitable parts of the group which lost 7.3 billion Swiss francs last year and still expects “substantial” losses in 2023.
This branch brings together retail banking and loans to SMEs. One of the avenues considered by analysts is that of an IPO, which could limit layoffs in Switzerland due to duplication with UBS’s activities.
On Sunday, the bank employees’ union in Switzerland “demanded” the participation of the social partners in the discussions on Sunday, given the “enormous” stakes for employment.
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 market policeman had accused him of having “seriously breached his prudential obligations”.
By contrast, UBS, which spent several years recovering from the shock of the 2008 financial crisis and a massive state bailout, is beginning to reap the rewards of its efforts.
The Competition Commission could also raise eyebrows depending on the configuration of the takeover.
At the end of October, Credit Suisse unveiled a vast restructuring plan providing for 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, plans to separate investment banking from the rest of its activities to refocus on its most stable areas, including wealth management.
But as Blick points out: “Everything points to a Swiss solution this Sunday. And when the stock market opens on Monday, Credit Suisse could be a thing of the past.”