UBS in talks to buy Credit Suisse

UBS is in talks to buy part or all of Credit Suisse, advance this Friday the ‘Financial Times” (paid access). The Swiss central bank and regulator Finma will be trying to reach a solution in record time before markets open on Monday. Remember that the bank’s market value sank by almost 30% during this week.

The two institutions are therefore looking for a way to resolve the distrust that has arisen around Credit Suisse. The news comes after it was confirmed that the Swiss central bank would inject up to 50 billion Swiss francs into the bank, a measure that does not seem to have been enough to contain the fears of the markets.

With the world markets closed, the Swiss central bank and regulator believe that this may be the ideal time to move forward with the deal, which could push UBS Group AG to acquire the Swiss counterpart, either in part or in full. UBS is one of the main players of financial services in the world.

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This same Friday, both UBS and Credit Suisse left the guarantee that the forced merger would not be an option, despite the markets showing fears that the injection of liquidity by the central bank may not be enough to save the Bank. Added to this is the confirmation that, despite the situation being extremely uncertain, the Saudis at the Saudi National Bank do not intend to finance Credit Suisse again.

Saudi National Bank, 37% owned by Saudi Arabia’s sovereign wealth fund, has a stake of around 10% in the bank, making it the bank’s largest shareholder.

Remember that, on Thursday, DBRS Morningstar downloaded the rating Long Term Issuer relating to Credit Suisse of A (low) to “BBB” (the last degree before garbage), in addition to keeping the outlook on negative ground.

The news refers that partial and total purchase options are on the table. The objective of the two institutions with this operation is to end the climate of distrust and doubt surrounding the bank.

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Furthermore, the British daily reports that the Swiss regulators have already communicated this intention to the North American and British regulators, in order to move quickly with the necessary steps to identify possible regulatory restrictions, as Credit Suisse operates in several jurisdictions.

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The merger of UBS and Credit Suisse is “plan A” to contain the sharp devaluation of the bank, but there will be other options on the table, according to information provided by the FT.

Currently, UBS has a market value of around 56 billion dollars. Credit Suisse ended the week with a market value of 8 billion, after losing 2.7 billion since Monday.

None of the four institutions involved wanted to comment for the time being, but according to information provided by the Bloomberg on Thursday, both UBS and Credit Suisse opposed a forced merger, with the former preferring to focus on its strategy and reticent about absorbing potential risks from its small rival.

However, as some analysts are beginning to point out, UBS may have no alternative.

News edited and updated at 23:50.