UBS makes $1 billion all-share offer for embattled Credit Suisse: reports

Credit Suisse has pushed back on Bloomberg’s offer reportedthe offer is too low and could harm shareholders and employees.

One possibility is that UBS buys Credit Suisse and spins off its Swiss business into an independent entity, The Wall Street Journal reported on Sunday. UBS would keep Credit Suisse’s wealth management arm, the report added, although talks are still in flux.

Credit Suisse stock is down 25% over the past week – the worst since the 2008 financial crisis – and is down 71% from a year ago. Credit Suisse American Depositary Receipts were up 7% late Friday and down 24% over the week, versus a 1.45 gain for the S&P 500 SPX.
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The possibility of a deal comes days after the Swiss National Bank was forced last week to provide Credit Suisse with a 50 billion Swiss franc ($54 billion) emergency credit line amid stress in the global banking sector US banks began with the failure of three.

Credit Suisse shares hit record lows in recent sessions after its largest investor said it would not provide any more capital and the lender’s chairman admitted wealth management clients would continue to exit the investment bank.

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also included a clause that allows the deal to be annulled if loan defaults rise by 100 basis points or more, the report said, citing four people close to the situation.

In a rush to close a deal before markets open on Monday, Swiss regulators are trying to change a law that imposes a six-week consultation period with shareholders. Many shareholders are expected to suffer losses given the price of the deal.

Sources told the FT that US authorities were also involved in talks of a merger between two of Switzerland’s largest banks, which is seen as the only way to bail out Credit Suisse. Regulatory authorities from Great Britain were also involved. The deal’s price tag also doesn’t include any additional stipulations from the Swiss National Bank to enforce it.

Ultimately, UBS plans for Credit Suisse to represent a third of its business. But the union would still create one of the largest global systemically important financial institutions in Europe — UBS has $1.1 trillion in total assets and Credit Suisse has $575 billion.

Neither the bank nor the Swiss National Bank nor the market regulator Finma wanted to comment on the Financial Times.

Credit Suisse shareholders have endured a series of scandals that have resulted in five straight quarters of losses and outflows of around $100 billion from its wealthy clients in the fourth quarter. The lender acknowledged significant financial control problems in its annual report last week.

Investors will now be waiting to see if a deal for Credit Suisse can calm markets and remove at least a layer of global stress for now. US federal authorities on Thursday organized major banks to invest $30 billion in First Republic Bank FRC.
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and stave off a fourth bank failure after last week’s collapses of Silicon Valley Bank, Signature Bank and Silvergate Bank.

Read: From the sudden collapse of the SVB to the fallout of Credit Suisse: 8 charts show turbulence in the financial markets

Investors have another Federal Reserve meeting this week. Markets are gearing up for Tuesday through Wednesday’s political meeting. In fed funds futures, traders now see a 75.3% chance of a 25 basis point rate hike on Wednesday on inflation concerns.

Read: What it will take to calm the nervousness of the banking sector: time and a Fed rate hike.