The Financial Times (FT) is all over the possible UBS takeover of Credit Suisse. They report Swiss rules require a 6 week period for shareholders to consult and vote on deals, but that an emergency waiver may be granted to close this deal before market open Monday.
One day before the Swiss central bank extended a $54 billion lifeline to Credit Suisse, Neuberger Berman bank specialist Steve Eisman (of Big Short fame) predicted UBS wouldn’t want Credit Suisse:
Credit Suisse has been a problem child in the investment banking industry for as long as I can remember. You heard today that maybe they want UBS to take it over. Believe me, UBS doesn’t want to take it over, that’s for sure.
The Credit Suisse lifeline happened the next day. Two days later on Friday, Credit Suisse remained under acute strain, and now a possible UBS deal is being hammered out.
The FT reports Credit Suisse and UBS boards are now sorting out concessions UBS wants in the deal, and reports these details:
– Two people [sources] said deposit outflows from the bank [Credit Suisse] topped $10.8 billion a day late last week.
– UBS wants to be allowed to phase in any demands it would face under global rules on capital for the worlds biggest banks.
– Additionally, UBS has requested some form of indemnity or government agreement to cover future legal costs one of the people [sources] said.
– Credit Suisse set aside SFr1.2bn in legal provisions in 2022 and warned that as yet unresolved lawsuits and regulatory probes could add another SFr1.2bn.
– Over the past three years, UBS shares have gained about 120% while those of its smaller rival have plunged roughly 70%.
– The former [UBS] had a market capitalisation of $56.6bn, while Credit Suisse closed trading on Friday with a value of $8bn.
– In 2022, UBS generated $7.6bn of profit whereas Credit Suisse made a $7.9b loss, effectively wiping out the previous decade’s earnings.
The rapid change of fortune from an intelligent call by an analyst like Eisman shows how fast things can change during these crisis periods.
Separately, the FT reports that the FDIC has resumed trying to find buyers for First Republic and Signature Bank, and is open to sharing in losses.
Which is what UBS is asking European regulators for.
This period is starting to have echoes of 2008 where regulators and banks were criticized for socializing the losses and privatizing the gains.
Below is a link to FT coverage of the UBS Credit Suisse situation (available to FT subscribers).
UBS market cap ($56.6b) & 2022 profit ($7.6b) vs. Credit Suisse $8b market cap & 2022 loss (-$7.9b) make a rival rescue tempting. But UBS wants many assurances.
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