On Sunday, UBS Group AG announced that it had reached an agreement to acquire Credit Suisse in a $3.2 billion rescue deal. Credit Suisse has been rocked by financial turmoil in recent weeks, with shares plummeting and trading being halted on Wednesday after the share price fell by up to 21%. The Swiss bank has also been linked to various scandals, including alleged fraud and failing to prevent money laundering.

credit suisse merged with UBS swiss bank

Brief about UBS-Credit Suisse Merger

UBS has agreed to acquire rival Swiss bank Credit Suisse for over $3 billion in an all-share deal, following the recent financial turmoil of the bank. Credit Suisse has seen its shares plummet in recent weeks due to “material weaknesses” in its financial reporting processes, problems that predate the current crisis. The Swiss government has helped broker the deal with an apparent goal of completing the merger before Asian markets open on Monday. The Swiss National Bank has offered Credit Suisse and UBS up to $108 billion in liquidity assistance loans as part of the agreement. The combined company will have over $5 trillion in total invested assets and UBS expects to make $8 billion in cost cuts over the next four years.

Here are the key highlights of the UBS deal to acquire Credit Suisse:

  1. Creates a leading global wealth manager with USD 5 trillion of invested assets across the Group.
  2. Extends UBS lead in Swiss home market.
  3. UBS strategy unchanged, including focus on growth in Americas and APAC.
  4. Attractive financial terms which include downside protection.
  5. Annual run-rate of cost reduction of more than USD 8 billion expected by 2027.
  6. UBS remains strongly capitalized well above their target of 13% and committed to progressive cash dividend policy.
  7. A focused Investment Bank, remaining committed to UBS’s model; strategic Global Banking businesses to be retained, majority of Credit Suisse markets positions moved to non-core.
  8. The transaction reinforces UBS’s position as the leading universal bank in Switzerland.
  9. UBS anticipates that the transaction is EPS accretive by 2027 and the bank remains capitalized well above its target of 13%.
  10. Colm Kelleher will be Chairman and Ralph Hamers will be Group CEO of the combined entity.
  11. The transaction is not subject to shareholder approval. UBS has obtained pre-agreement from FINMA, Swiss National Bank, Swiss Federal Department of Finance and other core regulators on the timely approval of the transaction.

Banking giant UBS is set to acquire its smaller rival Credit Suisse, according to an announcement made by Swiss President Alain Berset on Sunday night. The deal aims to avoid further turmoil in global banking and to stabilize the international finance system. Credit Suisse is designated by the Financial Stability Board as one of the world’s globally systemic important banks, and its uncontrolled failure would lead to ripples throughout the financial system. The 167-year-old bank had already received a $50 billion loan from the Swiss National Bank, which briefly caused a rally in the bank’s stock price. However, the move did not appear to be enough to stem an outflow of deposits.

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The deal follows the collapse of two large U.S. banks last week, which spurred a broad response from the U.S. government to prevent any further bank panics. Global financial markets have been on edge since Credit Suisse’s share price began plummeting this week. Credit Suisse’s problems are unique and do not overlap with the weaknesses that brought down Silicon Valley Bank and Signature Bank, whose failures led to a significant rescue effort by the Federal Deposit Insurance Corporation and the Federal Reserve. Therefore, their downfall does not necessarily signal the start of a financial crisis similar to what occurred in 2008.

Merged Entity future course of Actions.

While smaller than its Swiss rival UBS, Credit Suisse still wields considerable influence, with $1.4 trillion assets under management. The firm has significant trading desks around the world, caters to the rich and wealthy through its wealth management business, and is a major advisor for global companies in mergers and acquisitions. Notably, Credit Suisse did not need government assistance in 2008 during the financial crisis, while UBS did.

The Swiss bank has been pushing to raise money from investors and roll out a new strategy to overcome an array of troubles, including bad bets on hedge funds, repeated shake-ups of its top management, and a spying scandal involving UBS. Despite the banking turmoil, the European Central Bank approved a large, half-percentage point increase in interest rates to try to curb stubbornly high inflation, saying Europe’s banking sector is “resilient,” with strong finances.

UBS’s acquisition of Credit Suisse will create a combined company with over $5 trillion in total invested assets. UBS expects to make $8 billion in cost cuts over the next four years. The Swiss government helped broker the deal, with an apparent goal of completing the merger before Asian markets opened on Monday morning. As part of the agreement, the Swiss National Bank offered Credit Suisse and UBS up to $108 billion in liquidity assistance loans.

What Shareholders will get from UBS-Credit Suisse Merger

The deal represents a large discount compared to Credit Suisse’s market capitalization just two days ago, with UBS paying the equivalent of $0.82 per share, less than half Credit Suisse’s $2.01 share price when markets closed on Friday. Credit Suisse investors will receive one UBS share for every 22.48 Credit Suisse shares held, up from a $1 billion initial offer that Credit Suisse reportedly viewed as too low.

The Swiss government is expected to speed up the deal by waiving the six-week waiting period normally required before a merger. Swiss authorities are also not requiring UBS to get shareholder approval. The Swiss National Bank said in a statement, “With the takeover of Credit Suisse by UBS, a solution has been found to secure financial stability and protect the Swiss economy in this exceptional situation.”

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Recent Bank Collapses in USA

The recent collapses of Silicon Valley Bank and Signature Bank in the U.S., triggered partially by rising interest rates, caused uncertainty about wider vulnerabilities in the banking system worldwide—concerns that intensified after warning signs appeared at Credit Suisse. However, the bank’s downfall wasn’t directly caused by SVB and Signature, and its problems predate the current crisis, as it ended the 2022 fiscal year with a loss of nearly $8 billion.

UBS’s acquisition of Credit Suisse is a significant development in the world of finance. It remains to be seen how the deal will impact the Swiss banking industry and the wider global economy.

While smaller than its Swiss rival UBS, Credit Suisse still wields considerable influence, with $1.4 trillion assets under management. The firm has significant trading desks around the world, caters to the rich and wealthy through its wealth management business, and is a major advisor for global companies in mergers and acquisitions. Notably, Credit Suisse did not need government assistance in 2008 during the financial crisis, while UBS did.

UBS’s acquisition of Credit Suisse is a stabilizing solution that is absolutely necessary. Many of Credit Suisse’s problems are unique and do not overlap with the weaknesses that brought down Silicon Valley Bank and Signature Bank, whose failures led to a significant rescue effort by the Federal Deposit Insurance Corporation and the Federal Reserve. As a result, their downfall does not necessarily signal the start of a financial crisis similar to what occurred in 2008.

Conclusion

In conclusion, the UBS Group AG’s announcement of its acquisition of Credit Suisse for over $3 billion in an all-share deal is a significant development in the world of finance. Credit Suisse has been rocked by financial turmoil, including alleged fraud and failing to prevent money laundering, which resulted in plummeting share prices and trading halts.

UBS’s acquisition of Credit Suisse will create a combined company with over $5 trillion in total invested assets, and UBS expects to make $8 billion in cost cuts over the next four years. The Swiss government helped broker the deal and offered Credit Suisse and UBS up to $108 billion in liquidity assistance loans. While smaller than its Swiss rival UBS, Credit Suisse still wields considerable influence with $1.4 trillion assets under management. It remains to be seen how the deal will impact the Swiss banking industry and the wider global economy.

The acquisition of Credit Suisse by UBS aims to prevent further instability in the global banking sector and stabilize the international finance system. Although Credit Suisse’s downfall is not necessarily a signal of a financial crisis

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