UBS agrees to buy struggling Credit Suisse for over $2 billion to ‘secure financial stability’

UBS, Switzerland’s largest bank, has agreed to buy rival Credit Suisse for more than $2 billion in an emergency deal to avert unrest stemming from the current banking crisis.

The Swiss National Bank announced the deal on Sunday, saying it would “guarantee financial stability and protect the Swiss economy”, following global market panic following the collapse of US-based Silicon Valley Bank and Signature Bank.

Credit Suisse shares fell 25% last week, sparking a run on banks by customers that resulted in total withdrawals of $10 billion a day, the Financial Times reported.

In order to avoid a complete collapse on Monday, Swiss officials agreed to accelerate the takeover of UBS, offering a $100 billion liquidity line to Credit Suisse as part of the deal.

The deal comes just a day after a meeting between UBS and the Swiss National Bank, where the company originally offered $1 billion for the takeover. Now UBS will pay about 54 cents per share of its own stock to secure the deal.

UBS and Credit Suisse are among the 30 largest banks in the world and together hold approximately $1.7 trillion in assets, with both headquarters based in Zurich.

Credit Suisse was in the best position 15 years ago during the 2008 financial crisis, with UBS being the bank that needed government help at the time.

But Credit Suisse has seen its shares fall 84% over the past two years, with UBS instead seeing its shares climb 15%.

As the second largest bank in Switzerland, Credit Suisse employed more than 50,000 people at the end of 2022.

The bank saw 30% of its share price plunge overnight Wednesday following market fears over SVB and the collapse of Signature Bank, with the Swiss National Bank offering a $54 billion lifeline that could not save the bank.

Along with the merger of the Swiss banking giants, S&P Global Inc. is expected to downgrade First Republic Bank again, less than a week after its initial rating was downgraded.

Sources told Bloomberg that the ratings firm will announce the downgrade from BB+ to just B+ this week, just days after downgrading it from A-, due to the impacts of the current banking crisis.

“After Thursday’s uninsured deposit of $30 billion by the nation’s 11 largest banks, along with available liquidity, First Republic Bank is well positioned to handle short-term deposit activity,” the bank said. in a press release. “This support reflects confidence in First Republic and its ability to continue to provide unwavering exceptional service to its customers and communities.”

S&P did not respond to the Post’s request for comment on Sunday.