Important weekend for Credit Suisse

Credit Suisse, one of 30 banks around the world deemed too big to fail, has two days to find the formula that will allow it to reassess and explain before markets open on Monday that Another dark week can be avoided.

This weekend, according to headlines from CH Media Group, crisis meetings are being held at Credit Suisse, but also at the Swiss banking sector’s regulators and even at the Federal Council: “What will be decisive is the board of directors What is UBS Will it acquire parts of Credit Suisse?

On Friday evening, the Financial Times confirmed, with multiple anonymous sources in support, that UBS, the number one in the sector in Switzerland, was in talks for a full or partial takeover of its rival, with the express blessing of Swiss regulatory authorities. ..

The Swiss Central Bank (SNB) “wants a simple solution before markets open on Monday”, assured the trade daily, adding it was not certain an agreement could be reached.

Neither Credit Suisse nor the SNB wanted to comment to AFP. UBS and the Swiss financial market watchdog (Finma) did not immediately respond to requests.

Credit Suisse is not expensive. After a dark week on the stock market that forced the central bank to lend 50 billion Swiss francs (50.4 billion euros) to revive the Zurich establishment and reassure markets, it was only 8 billion Swiss francs (8.1) billion euros) closed on Friday evening.

But an acquisition of this size is extremely complex, and moreover necessary.

And while two regulators may have claimed at the height of the storm that “Credit Suisse meets the capital and liquidity requirements imposed on systemically important banks”, disbelief persists.

– Redemption but whose? ,

Credit Suisse has recently experienced two years marked by numerous scandals, manifested by management’s admission of “substantial weaknesses” in its “internal controls”. He was accused by FINMA of “seriously breaching his prudential obligations” in the bankruptcy of financial company Greenseal, which marked the beginning of his string of failures.

The logo of Swiss bank UBS on the Opera Tower in Frankfurt, Germany, on February 7, 2023 (AFP/Archive – Daniel Rolland)

In 2022, the bank had a net loss of 7.3 billion Swiss francs, against the backdrop of massive withdrawals of money from its customers. It still expects a “substantial” pre-tax loss this year.

“This is one bank that’s never going to get its house in order,” IG analyst Chris Beauchamp commented in a market note this week.

And it’s unclear whether UBS, which spent years recovering from the shock of the 2008 financial crisis, will want to restructure any further as it begins to reap the rewards of its efforts.

One of the constraints this merger will pose to the bank that emerges from it, one of the options, according to some analysts, is to separately list the Swiss arm of Credit Suisse, which combines retail banking and lending to SMEs. … It would also avoid mass layoffs in Switzerland due to inevitable duplication.

The competition commission may also raise eyebrows, said Eugene Haltiner, a former FINMA boss, in an interview with CH Media Group. “COMCO will undoubtedly see significant headwinds as the two establishments have a dominant position in the market,” he explained.

Important banks for the global financial system (AFP-Jonathan Walter)
Important banks for the global financial system (AFP-Jonathan Walter)

Only the management of the funds and fortune can then be transferred to UBS or any other suitor, the FT indicates.

– Fast, strong –

In late October, Credit Suisse unveiled a massive restructuring plan that includes eliminating 9,000 positions by 2025, or more than 17% of its workforce.

The bank, which employed 52,000 people at the end of October, intends to refocus on its most stable activities and radically transform its commercial banking.

A large part of the heavily loss-making investment bank’s activities should first be grouped under the Boston brand (named after an American investment bank that Credit Suisse absorbed in 1990) and then gradually outsourced.

But according to analysts at Morningstar, its restructuring is “too complicated” and doesn’t go “far enough” to reassure donors, customers and shareholders. Specifically, they suggest that Credit Suisse sell its brokerage business.

Analysts at US bank JPMorgan are considering a more drastic option: for Credit Suisse to “completely” spin off its investment banking business.

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