Tag Archive for: Credit Suisse

UBS to Buy Credit Suisse in $3.3 Billion Deal to End Crisis

The Swiss bank is paying 3 billion francs ($3.2 billion) for its rival in an all-share deal that includes extensive government guarantees and liquidity provisions.

(Bloomberg) — UBS Group AG agreed to buy Credit Suisse Group AG in a historic, government-brokered deal aimed at containing a crisis of confidence that had started to spread across global financial markets.

The Swiss bank is paying 3 billion francs ($3.2 billion) for its rival in an all-share deal that includes extensive government guarantees and liquidity provisions. The price per share marked a 99% decline from Credit Suisse’s peak in 2007.

The Swiss National Bank is offering a 100 billion-franc liquidity assistance to UBS while the government is granting a 9 billion-franc guarantee for potential losses from assets UBS is taking over. Regulator Finma said about 16 billion francs of Credit Suisse bonds, known as AT1s, will become worthless to ensure private investors help shoulder the costs.

UBS slumped 8.8% in early Zurich trading, while Credit Suisse declined about 64%, valuing the firm at about 2.71 billion francs.

The plan, negotiated in hastily arranged crisis talks over the weekend, seeks to address client outflows and a massive rout in Credit Suisse’s stock and bonds over the past week following the collapse of smaller US lenders. A liquidity backstop by the Swiss central bank mid-week failed to end a market drama that threatened to send counterparties fleeing, with potential ramifications for the broader industry.

“It was indispensable that we acted quickly and find a solution as quickly as possible“ given that Credit Suisse is a systemically important bank, Swiss National Bank President Thomas Jordan said at a press conference late Sunday.

The Federal Reserve and Treasury Department welcomed the deal, as did the European Central Bank. US authorities had been working with their Swiss counterparts because both lenders have extensive operations in the US, Bloomberg reported earlier. Authorities sought an agreement before markets opened again in Asia. The transaction is expected to be completed by the end of the year if possible, Credit Suisse said in a statement Sunday.

US and European equity futures erased earlier gains Monday to trade little changed. Asian shares slumped, with HSBC Holdings Plc plunging as much a 6.6% to lead declines by lenders. Some Asian banks’ additional tier 1 bonds fell by a record.

The Fed and five other central banks announced coordinated action on Sunday to boost liquidity in US dollar swap arrangements, the latest effort by policymakers to ease growing strains in the global financial system.

UBS Chairman Colm Kelleher said he will shrink Credit Suisse’s investment bank, a unit that has racked up losses in recent years, likely ending the dreams of a CS First Boston spinoff. The Swiss universal bank, the one business of Credit Suisse that has remained a relative bastion of stability, is expected to stay with UBS, despite concerns about concentration in the domestic market.

“Let me be very specific on this: UBS intends to downsize Credit Suisse’s investment banking business and align it with our conservative risk culture,” he said at a press conference announcing the deal. He said it’s too early to say how many jobs may be cut after the deal.

The government’s loss-guarantee was necessary because there was little time to do due diligence and Credit Suisse has hard-to-value assets on its books that UBS plans to wind down, Kelleher said. If that results in losses, UBS would assume the first 5 billion francs and the federal government the next 9 billion francs.

Kelleher said it’s too soon to know a job-cut number, but UBS indicated it will be significant. The firm said in a statement Sunday it plans to cut the combined company’s annual cost base by more than $8 billion by 2027. That’s almost half of Credit Suisse’s expenses last year.

Credit Suisse told staff in an internal memo it will work to identify which roles might be impacted, and “will aim to continue to provide severance in line with market practice.” There will be no changes to payroll arrangements and bonuses will still be paid on March 24, the memo said. A spokeswoman confirmed the contents of the memo.

Under the deal, Kelleher and UBS Chief Executive Officer Ralph Hamers will retain their roles in the combined entity. A representative for Finma, said at the press conference that Credit Suisse’s management will stay in place until the deal closes. Then, their future becomes a decision for UBS.

Hamers told staff not to talk about business matters with counterparts at Credit Suisse.

“Please remember that, until this deal closes, Credit Suisse is still our competitor,” Hamers wrote in a memo to employees. A spokesperson for UBS didn’t immediately respond to an email seeking comment on the memo.

The takeover of the 166 year-old lender marks a historic event for the nation and global finance. The former Schweizerische Kreditanstalt was founded by industrialist Alfred Escher in 1856 to finance the build-out of the mountainous nation’s railway network. It had grown into global powerhouse symbolizing Switzerland’s role as a global financial center, before struggling to adapt to a changed banking landscape after the financial crisis.

UBS traces its roots back through some 370 separate institutions, culminating in the merger of the Union Bank of Switzerland and the Swiss Bank Corporation in 1998. After emerging from a state bailout during the 2008 financial crisis, UBS built a reputation as one of the world’s largest wealth managers, catering to high- and ultra-high net worth individuals globally.

While Credit Suisse avoided a bailout during the financial crisis, it has been hammered over recent years by a series of blowups, scandals, leadership changes and legal issues. Clients had pulled more than $100 billion of assets in the last three months of last year as concerns mounted about its financial health, and the outflows continued even after it tapped shareholders in a 4 billion-franc capital raise.

“This was the only possible solution,” Swiss Finance Minister Karin Keller-Sutter said, adding it was needed to stabilize the Swiss as well as international financial markets. Credit Suisse, she said, was no longer able to survive on its own.

–With assistance from Myriam Balezou, Bastian Benrath and Tom Redmond.


Sources: Wealth Management

UBS Uncertainty – Merger Discussions With Credit Suisse Surface, Advisors Should Prepare For More Change At The Firm

Over the weekend it was discovered that UBS leadership has been considering potential merger partners, and Credit Suisse was specifically named. A like-minded Swiss firm that has already divested its US wealth management operations several years ago. The report claimed that the talks have been exploratory in nature and nothing is imminent or definitive, but this news begs a whole lot of questions.

What to make of it with respect to UBS advisors here in the US? How would a merger, of any kind, potentially affect advisors and teams that have continued to remain loyal to the UBS brand? Speculation could take this conversation anywhere, so let’s take some of UBS’ recent moves and put them in the context of a potential Swiss mega-merger.

First, there has been a tremendous amount of ‘cost-saving’ window dressing in the past couple of years at UBS (both here in the US and globally). A protocol exit was accompanied by a significant drawdown in recruiting bonus balances that sat on UBS’ balance sheet. The decision to exit the protocol meant that UBS was more comfortable litigating any move away from the firm as opposed to competing in earnest on the recruiting field of play.

Second, UBS has been furiously recruiting private bankers from Goldman Sachs, Alliance Bernstein, and even J.P. Morgan. They’ve pulled more recruits from the banking ranks than other channels so far in 2020. This is telling when you put in the context of creating a potential Swiss banking monolith that would be UBS + Credit Suisse. Where is the wealth management compensation model headed, longer-term, at UBS? If you pan out the writing seems to be on the wall.

Third, UBS is about to implement the announced comp grid changes that increase hurdles by 20% across the board to earn the same level of comp advisors have earned in the past. In other words, increasing unit profitability as the firm ‘explores potential strategies’ that could find itself either executing a mega-merger or selling different pieces of itself to meaningfully push up its value i.e. stock price (which many of you know hasn’t moved in a meaningful way in years).

The report itself comes from Bloomberg news, here is what they reported:

“UBS Group AG Chairman Axel Weber has been studying the feasibility of a mega-merger with rival Credit Suisse Group AG as part of a regular thought-exercise on future strategic options, according to people familiar with the matter.”

“UBS, the world’s largest wealth manager, has been exploring the question with consultants but it hasn’t raised the topic at the level of the executive board, the people said. The assessment is part of regular internal planning procedures and there are currently no formal discussions going on between the two banks, said the people, who asked for anonymity because the information isn’t public.”

“Both banks declined to comment. Speculation about a deal was stoked earlier Monday when Swiss finance blog Inside Paradeplatz wrote that Weber and Credit Suisse’s chairman Urs Rohner could agree on a merger as early as next year. Both banks declined to comment on the report.”Bottom line, where there is smoke there is always fire. If it isn’t a Credit Suisse merger, something else is afoot. More change is coming to UBS and it will trickle down to advisors that are employed by the firm. It will be quite interesting to see if this type of news furthers the current trend of larger teams leaving UBS for greener (and more stable) pastures.


Belgium investigates Credit Suisse over hidden accounts

Belgian prosecutors have launched an investigation into whether Swiss bank Credit Suisse (CSGN.S) helped some 2,650 Belgians hide their accounts from tax authorities.

The investigation by federal prosecutors is at the information-gathering stage and no charges have been brought, a spokesman for the prosecutors said on Monday.

The inquiry concerns accounts held between 2003 and 2014 on which Belgian prosecutors received information last year from French authorities, who have also conducted their own investigations into the bank and French customers.

The spokesman said the case concerned up to 2,650 Belgian clients, although some may have already declared their funds to the tax authorities.

“We strictly comply with all the applicable laws, rules, and regulations in the markets in which we operate,” Credit Suisse said in an emailed response to a request for comment on the investigation.

The bank wishes to conduct business with clients who have paid their taxes and fully declared their assets, it said.

Swiss banks have faced similar probes in several countries over the past decade after the country was forced to give up its cherished tradition of banking secrecy.

Original Source: Belgium investigates Credit Suisse over hidden accounts