UBS to buy Credit Suisse for just $3.2 billion

Switzerland’s largest bank, with the participation of the country’s authorities, has agreed to buy its main competitor, Credit Suisse, for just 3 billion francs ($3.2 billion). That’s more than three times the price negotiated this morning, but 2.5 times less than Credit Suisse’s capitalization at close on Friday, when it was 7.4 billion francs ($8 billion).

And this is 10 times less than the funds of the Russian oligarchs managed by Credit Suisse a year ago.

The Swiss authorities announced the agreement on Sunday evening. UBS has agreed to raise the price of the deal, which will be paid for in its shares, from 0.25 francs per Credit Suisse share to over 0.5 francs, the Financial Times reports. for those familiar with the negotiations. But eventually regulators announced the deal would go through at 0.76 francs a share.

The Swiss National Bank has agreed to give UBS $100 billion to provide the bank with sufficient liquidity while it integrates the operations of its struggling competitor. Meanwhile, on Thursday morning alone, Credit Suisse announced it planned to borrow up to 50 billion francs ($54 billion) from the central bank.

According to FT sources, representatives of the banks had little contact with each other during the negotiations, the terms of the agreement were mainly formulated by representatives of the Central Bank and the financial regulator FINMA. The US Federal Reserve approved the takeover (both banks operate on the US market).

Its terms mean that Credit Suisse shareholders will effectively lose the vast majority of their investments. Among them is Saudi National Bank, which bought a 9.9% stake in Credit Suisse last October for $1.5 billion in a $4 billion deal that was subsequently carried out by the Swiss bank. that his bank would not allocate additional funds sent Credit Suisse’s shares crashing on Wednesday: they fell 31% during trading and closed with a record 24% drop for the bank.

In addition, FINMA said the cost of Credit Suisse’s riskiest bonds at 16 billion francs ($17.2 billion) would be fully written off.

During the 2008 financial crisis, the Swiss authorities had to bail out UBS, while Credit Suisse survived it on its own. For a time, he was in a better position than his competitor, not least because of the successful results of the wealth management department. Among his clients were many Russian billionaires and millionaires, whom Credit Suisse actively hunted in 2000-2010. According to people familiar with the situation at the bank and the department for cooperation with Russian clients, the assets of the latter at its peak exceeded $ 60 billion, Bloomberg wrote. Among them were Alisher Usmanov, Roman Abramovich, Viktor Vekselberg, Oleg Deripaska, Andrei Melnichenko, Mikhail Fridman.

Last spring, Credit Suisse ran $33 billion wealthy Russians (although a significant proportion of them were frozen due to the sanctions). This is one and a half times the size of UBS, although UBS’s wealth management unit as a whole is much larger.

Over the past three years, Credit Suisse has been trying to restructure itself after a series of scandals and financial problems that primarily plagued its investment banking division. However, the fortunes could not be reversed and the outflow of client funds from the wealth management unit continued.

As a result of the transaction, UBS will have $5 trillion in assets under management.

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