Credit Suisse faces a fateful weekend. Will UBS launch a bailout bid?
The fate of Credit Suisse could be decided within the next 36 hours after a torrid week for Switzerland’s second-largest bank.
Investors and clients have withdrawn their money from Credit Suisse in recent days as unrest swept through the global banking sector following the collapse of two US lenders. The bank’s shares fell 25% during the week, despite a $54 billion emergency loan from the Swiss National Bank. The price of financial contracts intended to protect investors against possible losses on its bonds has reached record levels.
More than $450 million was withdrawn from European and US funds managed by the bank between Monday and Wednesday, according to Morningstar.
The Swiss central bank’s lifeline, announced late Wednesday night after the stock slumped to a new all-time high, has been buying Credit Suisse (CS) for some time. But on Friday, analysts were speculating on the need for a large-scale rescue, and rumors began to circulate of a possible takeover by its biggest Swiss rival, UBS (UBS).
Reuters and the Financial Times, citing people familiar with the matter, both reported that Swiss regulators were urging banks to strike a deal before markets open on Monday to bolster confidence in the country’s banking system. The FT said the boards of UBS and Credit Suisse were due to meet separately over the weekend.
Credit Suisse and UBS both declined to comment to Reuters.
BlackRock (BLK), which owns 4% of Credit Suisse, denied a separate Financial Times report that it was preparing an alternative bid for all or part of the beleaguered bank.
“BlackRock is not involved in any proposed acquisition of all or part of Credit Suisse and has no interest in doing so,” a BlackRock spokesperson told CNN.
Credit Suisse, which is among the 30 most important banks in the global financial system, has been on the ropes for years following a series of scandals, huge losses and strategic missteps. Its stock has fallen 75% in the past 12 months. But the crisis of confidence quickly worsened this month.
The failure of Silicon Valley Bank last week, the largest by a US lender since the 2008 global financial crisis, sent investors fleeing other players perceived to be weak.
Then Credit Suisse dropped another bombshell. Publishing its annual report on Tuesday, the 167-year-old bank acknowledged a “material weakness” in its financial reporting, adding that it had failed to adequately identify potential risks to its financial statements.
The next day, its largest shareholder – the Saudi National Bank – made it clear that it would no longer inject money into the bank, after spending $1.5 billion last year for a nearly 10% stake . This spooked investors.
In a note released Thursday, banking analysts at JPMorgan wrote that a takeover by UBS was the most likely endgame.
UBS would likely spin off Credit Suisse’s Swiss operations since the combined market share would represent around 30% of the Swiss domestic banking market and mean “too much risk of concentration and market share control”, they added.
In an article published on Saturday, the Neue Zürcher Zeitung – a newspaper in Zurich, the headquarters of the two banks – said that “the future of Credit Suisse will be decided this weekend”. The Swiss government was due to issue a statement on Sunday evening, he added.
— Anna Cooban and Rob North contributed to this article.