In what’s being called a historic deal, Swiss banking giant UBS (UBS) is buying troubled lender Credit Suisse (CS) for 3 billion Swiss francs ($3.2 billion U.S.).
Regulators and the government in Switzerland played a big role in brokering the deal as they try to stem contagion in the Swiss baking sector and the broader global financial system.
The takeover will see Credit Suisse shareholders receive 1 UBS share for every 22.48 Credit Suisse shares they own. The combined banks will have $5 trillion U.S. of invested assets.
Additionally, the Swiss central bank has committed a loan of up to $108 billion U.S. to support the takeover.
The Swiss government will assume losses of up to $9.69 billion U.S. from certain assets over a pre-set threshold to help reduce risks for UBS.
The UBS deal was put together over the weekend before markets reopened for trading today (March 20). Credit Suisse’s stock suffered its their worst weekly decline since the COVID-19 pandemic last week, declining 18%.
The share price sank despite Credit Suisse being given a new loan of $54 billion U.S. from the Swiss central bank last week.
Credit Suisse has struggled for years with financial losses and trading scandals. Sentiment was most recently hurt by news that Credit Suisse had delayed the release of its annual report and the collapse of Silicon Valley Bank (SIVB) and Signature Bank (SBNY) in the U.S.
Credit Suisse lost nearly 40% of its deposits in the fourth quarter of 2022 as depositors pulled funds from the troubled lender. It reported a full-year net loss of $7.86 billion U.S. for 2022.
Credit Suisse’s stock has declined 75% over the last 12 months to trade at $2.01 U.S. per share. UBS stock has fallen 3% in the same period to $18.20 U.S. a share.
