UBS examines Credit Suisse deal in combination of crises

(Bloomberg) — UBS Group AG is considering an acquisition of all or part of Credit Suisse Group AG, at the urging of Swiss regulators, after a crisis of confidence plagued its smaller rival, the matter has been informed.

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Swiss officials are urging UBS to explore various ways it could be involved in a solution for Credit Suisse, the people said, asking not to be named and to describe private conversations. Deliberations are ongoing and it’s unclear if a deal will come about, the people said.

The boards of Switzerland’s two biggest banks are expected to meet separately this weekend to weigh the idea of ​​a combination, with talks being orchestrated by the Swiss National Bank and regulator Finma, according to the Financial Times, which discussed the deliberations earlier on Friday reported.

UBS and Credit Suisse spokesmen declined to comment.

The aim is to announce a deal between the two banks by Sunday evening at the latest, said a person familiar with the matter, who also asked not to be named during the talks. However, the situation remains fluid and could change.

A government-brokered deal would address a defeat at Credit Suisse, which sent shockwaves through the global financial system this week as panicked investors dumped their stocks and bonds following the collapse of several smaller US lenders. A liquidity backstop from the Swiss central bank briefly halted the declines, but the market drama poses the risk that customers or counterparties will continue to flee, with possible repercussions for the broader industry.

The government, central bank and Finma have been in close contact to discuss further ways to stabilize Credit Suisse, Bloomberg reported earlier this week. Among the ideas floated were a split of the bank’s Swiss unit and an orchestrated link with UBS, people familiar with the matter previously said. UBS and Credit Suisse executives have opposed such an arranged merger, people familiar with the matter said earlier this week.

UBS would prefer to focus on its own wealth-focused standalone strategy and is reluctant to take risks related to Credit Suisse, the people said, asking not to be named because the deliberations are private. Credit Suisse is looking for time to turn around after receiving the $54 billion line of credit from the central bank, they said.

Credit Suisse’s market value has fallen to around 7.4 billion Swiss francs ($8 billion) from a peak of over 100 billion Swiss francs in 2007. The market value of UBS is CHF 60 billion.

Credit Suisse, whose roots date back to 1856, has been plagued by a series of explosions, scandals, leadership changes and legal troubles in recent years. The company’s loss of 7.3 billion Swiss francs last year wiped out the gains of the previous decade.

Clients withdrew more than $100 billion in assets in the last three months of last year amid growing concerns about its financial health, and outflows have continued even after it told shareholders in a capital raise of had tapped 4 billion francs.

–With support from Marion Halftermeyer, Gillian Tan and Steven Arons.

(Updates aiming to announce a deal by Sunday in the fifth paragraph.)

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