H one of the 30 biggest banks in the world considered too important to fail, has two days to find a formula that will allow it to reassure and convince, before the opening, on Monday, of the markets and the spectrum of a new black week.
yesterday, friday, evening, citing unnamed sources, that UBS, Switzerland’s largest bank, is in talks to buy all or part of its rival, with the blessings of Swiss regulators.
The Swiss central bank (BNS) “wants a simple solution before the markets open on Monday,” the business paper assures, which acknowledges that it is not certain that a deal will be possible.
Neither Credit Suisse nor BNS wanted to comment to AFP. UBS and the Swiss money market regulator (Finma) did not immediately respond to requests for comment.
Certainly Credit Suisse is not expensive. After a dark week in the stock market, which forced the central bank to lend 50 billion Swiss francs (50.4 billion euros) to give the Zurich bank a breather and reassure markets, it was not worth at last night’s close of the stock market rather than just over 8 billion Swiss francs (8.1 billion euros).
But an acquisition of this size is terribly complicated, all the more so because in this case it is urgent.
And although the two regulators stress that “Credit Suisse meets the capital and liquidity requirements imposed on systemically important banks”, the rise in the bank’s credit default swaps (CDS) premiums is a sign of a lack trust.
Redemption, but of what?
Credit Suisse has gone through two years marked by scandals, which revealed, management admitted, “material weaknesses” in its “internal control”. Finma had accused it of “skipping its audit obligations” in the bankruptcy case of financial firm Greensill, which marked the beginning of the problems.
In 2022, the bank had a net loss of 7.3 billion Swiss francs, amid massive withdrawals from its customers. He expects to have a “significant” pre-tax loss this year as well.
“It’s a bank that looks like it’s never going to be able to get its house back in order,” IG analyst Chris Bossan noted in a comment this week.
As for UBS, it has spent years recovering after flirting with disaster during the 2008 crisis. And it is not certain that it will want to embark on a new restructuring now that it is beginning to reap the rewards of its efforts.
The scenario of a bank takeover of Credit Suisse was also mentioned this week by analysts at JP Morgan, “with UBS as a potential option”.
To be listed on the stock exchange
Given the weight of a merger, analysts say Credit Suisse’s Swiss arm, which includes retail banking and loans to small and medium-sized businesses, could go public or be spun off.
This would also be a way to avoid mass redundancies in Switzerland due to unavoidable overlapping of activities.
According to the FT, only funds and property management could then be awarded to UBS or another candidate.
Another obstacle to a merger is the Competition Commission, estimates a former head of Finma, Essen Altine, in an interview with the CH Media group. “The Competition Commission would undoubtedly see significant obstacles because the two institutions have a dominant position in the market,” he explains.
On Wednesday, with the help of the central bank, Credit Suisse gained “valuable time”, analysts at Morningstar estimated, who judged, however, that its restructuring was “too complicated” and did not go “far enough” to reassure financiers. customers and shareholders.
Among other things, they suggest that Credit Suisse sell its loss-making brokerage business.
The analysts of the American bank JP Morgan are considering a radical option that consists in “completely closing down” the activity of the investment bank.
In late October, Credit Suisse unveiled a sweeping restructuring plan that included cutting 9,000 jobs by 2025, or more than 17% of its workforce.
The bank, which at the end of October employed 52,000 people, is seeking to focus on its more stable businesses and radically transform its business bank.
Source: APE – MEB