UBS in talks to acquire Credit Suisse

The banks have been discussing a number of scenarios, including ones that end with UBS acquiring all or part of Credit Suisse, according to people familiar with the situation.

UBS has long been seen as part of a government-backed solution for Credit Suisse, whose balance sheet is about half the size of UBS’s $1.1 trillion total assets. Any outright takeover would give UBS valuable businesses within Credit Suisse, such as wealth clients in Asia and the Middle East, but could include less desirable entities like Credit Suisse’s ailing investment bank. It could also derail UBS’s existing strategy and perceived stability among investors.

UBS has a market cap of around $65 billion versus Credit Suisse’s $8 billion, according to FactSet.

Both banks are considered systemically important in Switzerland and globally, and a combination could be subject to additional prudential and capital requirements.

The Swiss authorities are expected to reach at least a rough agreement before the market opens on Monday. A spokesman for the financial regulator Finma and the SNB declined to comment. A spokeswoman for the Treasury Department said it was not commenting on the rumours.

The talks, previously reported by the Financial Times, may not result in a transaction between Credit Suisse and UBS. They are the two largest banks by assets in Switzerland, serving savers and businesses there, as well as wealthy customers around the world. Both have Wall Street investment banks and large wealth management businesses.

UBS might not be the only player in the mix. Other financial institutions are reviewing the situation to see if they could buy parts of Credit Suisse or refund offers, people familiar with the effort said.

Large wealth managers have long been coveted some of the bank’s investment businesses, including its European real estate and US wealth management arms. Credit Suisse executives have repeatedly rejected these offers, arguing that wealth management is a core part of their business.

Credit Suisse’s slide toward state aid comes after other banks and major investors pulled out of deals with the Swiss lender last week. Other investment firms halted trading with the bank in the fall as years of trouble worsened, people familiar with the matter said.

Analysts were concerned that wealthy customers could withdraw their money. Executives at other banks said they received inflows from Credit Suisse clients last week.

Using UBS to bail out Credit Suisse marks a reversal from nearly 15 years ago, when Switzerland bailed out UBS after it was stuck with billions in toxic assets in its US business. At the time, Credit Suisse refused state aid and emerged stronger from the crisis.

It continued to suffer from tougher financial regulation and costly settlements with regulators. The bank went through a series of restructurings. Credit Suisse’s newest management team, some of whom had previously worked at UBS, had asked for more time to prove they could turn things around.

—Patricia Kowsmann contributed to this article.

Write to Justin Baer at justin.baer@wsj.com, Margot Patrick at margot.patrick@wsj.com and Ben Dummett at ben.dummett@wsj.com