UBS secures £2.7bn Credit Suisse rescue

UBS snaps up Credit Suisse in £2.7bn rescue deal as financial regulators rush to contain biggest banking crisis since 2008

  • Shotgun wedding of Swiss banks announced in government-backed deal
  • Switzerland’s central bank said ‘solution found to secure financial stability’ 
  • UBS was set to make offer worth just under £820m, but this was rejected

UBS has snapped up Credit Suisse in a £2.7billion rescue deal as financial regulators rush to contain the biggest banking crisis since 2008.

The shotgun wedding of Switzerland’s two biggest banks was announced late yesterday in a government-backed deal.

In a statement, Switzerland’s central bank said ‘a solution has been found to secure financial stability and protect the Swiss economy in this exceptional situation’.

UBS was set to make an all-share offer worth just under £820m yesterday morning, but this was rejected by the Credit Suisse board.

Although the improved deal is worth £2.7billion, including a liquidity assistance loan of up to £88billion, it still values Credit Suisse far below the bank’s closing price on Friday, virtually wiping out the beleaguered bank’s shareholders.

Talks were orchestrated by the Swiss National Bank and regulator Finma, with support from the Bank of England. Credit Suisse is one of 30 banks deemed too big to fail by the industry. The tie-up comes after Credit Suisse shares had their worst week since the start of the pandemic.

The sector has been shaken by the collapse of Silicon Valley Bank (SVB) in the US this month and dwindling market confidence. More than £400billion was wiped off the value of bank shares globally last week alone.

Credit Suisse, based in Zurich, has been in discussions with UBS and regulators since it secured an emergency loan of up to £45billion by the Swiss authorities last week.

UBS shareholders would normally have six weeks to consider a deal on this scale. Vincent Kaufmann, chief executive of Ethos Foundation, which represents Swiss pension funds that own between 3 per cent and 5 per cent of Credit Suisse and UBS, told the Financial Times: ‘I can’t believe our members and UBS shareholders will be happy. I have never seen such measures; it shows how bad the situation is.’

The Saudi National Bank and the Qatar Investment Authority are the two largest shareholders, jointly owning 17 per cent of the stock.

The rescue caps years of turmoil at the 167-year-old bank. It took an £8billion hit in 2021 following the collapse of Greensill Capital and lost £4.5billion when US investment fund Archegos went under.

It became the first Swiss firm to be found guilty of a corporate crime after it laundered money for a Bulgarian drug cartel.

Former Lloyds Bank boss Antonio Horta-Osorio was forced out as chairman last year after he breached Covid quarantine rules to watch major football and tennis finals on the same day.

Deal will not stop ‘whack a mole’ jitters in markets 

Banking stocks face another week of turmoil despite the rescue of Credit Suisse staving off a wider meltdown.

‘This deal will inject some stability back into the banking sector,’ Hargreaves Lansdown analyst Susannah Streeter said. ‘Investors will be relieved the authorities are ready to do what it takes to bring about stability.

But fears over the sector’s health – sparked by the collapse of US-based lenders Silicon Valley Bank, Silvergate and Signature Bank – remain. Streeter warned there is ‘a game of whack a mole’ emerging – with one crisis being averted and another popping up elsewhere.

There are also fears around US banks after the injection of £25billion into San Francisco-based First Republic failed to ease jitters. Its shares fell almost a fifth despite 11 Wall Street firms teaming up on the funding deal

Streeter said: ‘There will be nervousness this week. Other banks may be sitting on large unrealised bond losses, and that will be back of mind.’