According to persons with insight into the matter, UBS Group AG is considering purchasing all or a section of Credit Suisse Group AG at the request of Swiss authorities after its smaller competitor was seriously damaged by a crisis of confidence.
As reported by the individuals who asked for anonymity because the conversations were private, Swiss authorities are pressuring UBS to think about every potential option it may contribute to a solution for Credit Suisse. According to the sources, discussions are still ongoing, and it is unknown whether a settlement will be reached.
The Financial Times, which first revealed the discussions earlier Friday, claimed that the boards of Switzerland’s top two banks anticipate meeting separately this weekend to discuss the potential of merging. The talks are being conducted by the Swiss National Bank and financial authority Finma.
As reported by a person having insight into the matter while addressing the negotiations, the objective is for the two banks to declare a settlement by Sunday evening at the earliest. Nevertheless, the issue is still a difficult process and might change.
A deal negotiated by the government would solve the Credit Suisse issue, which last week sent shock across the nation’s financial system when frightened investors ditched its bonds and stock after the failure of several smaller American lenders.
Even though the market drama holds the possibility that customer counterparties would continue to leave, with possible consequences for the bigger industry, the falls were stopped briefly by a liquidity backstop by the Swiss banking system.
Bloomberg revealed recently this week that the government, central bank, and Finma had been in regular contact to discuss additional strategies to stabilise Credit Suisse.
According to individuals with a prior understanding of the scenario, orchestrated tie-up included a planned alliance with UBS and the split of the bank’s Switzerland division. Those with insight into the matter previously this week claimed that Credit Suisse and UBS officials had rejected such a pre-arranged pairing.
The people, who declined to provide their names because the talks are confidential, said that UBS would prefer to rely on developing a wealth-centric autonomous plan and is unwilling to take on risks associated with Credit Suisse. After obtaining the $54 billion loan line from the central bank, Credit Suisse is asking for more time to finish its turnaround, they alleged.
From a 2007 record of more than 100 billion francs, Credit Suisse’s valuation has dropped to roughly 7.4 billion Swiss francs ($8 billion). The valuation for UBS is 60 billion Swiss francs.
Credit Suisse, which has a history dating back to 1856, has suffered financially lately due to a sequence of scandals, leadership changes, blowups, and legal issues. The firm lost 7.3 billion francs last year, wiping out all the revenues from the preceding ten years.
As worries about its economic security grew, customers withdrew more than $100 billion worth of assets in the final three months of the previous year, as well as the withdrawals have remained after the company tapped investors for a 4 billion franc capital increase.