The agreement is there, the rescue of the Credit Suisse it's guaranteed, the word is now in the markets. Just before 20pm on Swiss government, who was following the negotiations very closely, confirmed in a long-awaited press conference that there is an agreement and that theubs will shop for 3 billion of Swiss francs, 0,76 francs per share, the shaky Credit Suisse, more than double what was initially offered. The value of the transactions is much less than the capitalization of MY BAG of Credit Suisse and at 1,86 francs at the close of the stock on Friday, but saves one of the main Swiss banks and removes from the field and from the market the loose cannon of a contagion that could have put the banking system is in danger not only Swiss but European and international. "The integration strengthens Switzerland as a global financial center," said UBS chairman Colm Kelleher.
100 billion of extra liquidity from the Swiss National Bank
Ubs had initially offered 1 billion francs, a proposal however deemed insufficient by Credit Suisse. In order to convince the leading Swiss bank, the Swiss authorities obtained various concessions, first of all 100 billion of extra liquidity by the Swiss Central Bank. Also on the table 9 billion public guarantees useful to cover redundancies and the possibility of derogating from the rules which provide six weeks for shareholders to give the green light to the transaction. Faced with what has been obtained, UBS has therefore decided to increase the offer first to 2 and then to 3 billion Swiss francs.
The marriage between the two banks is expected to generate an annual rate of cost reduction in excess of $8 billion by 2027. Colm Kelleher the role will be held by the president, while a Ralph Hamers, the current CEO of UBS will be appointed CEO of the new entity.
The acquisition of Credit Suisse by UBS, states the Authority, “takes place in close coordination with the FINMA, the Confederation and the BNS. The extraordinary support by the government results in a full write-off of the par value of all Credit Suisse AT1 bonds in the amount of approx. 16 billion francs and thus an increase in core capital. The bank resulting from the merger is larger in size. The current regulation provides for more stringent capital buffers in this regard. The Finma will grant appropriate transitional terms for its constitution".
Market response on Monday
"With the acquisition of Credit Suisse by UBS - said the Swiss central bank and other authorities - a solution has been found for ensure financial stability and protect the Swiss economy in this exceptional situation”. A message sent above all to the markets after the sell-off on the Credit Suisse stock and the contagion effect that sent almost all the major European banks into the red.
The wait is now for the response of the Stock Exchanges which, when they reopen tomorrow morning, will say how they evaluate the purchase of Credit Suisse by UBS.
(Last update at 21.07 on 19 March).
