Current:Home > NewsJohnathan Walker:UBS to purchase Credit Suisse amid fallout from U.S. bank collapses -Capitatum
Johnathan Walker:UBS to purchase Credit Suisse amid fallout from U.S. bank collapses
PredictIQ Quantitative Think Tank Center View
Date:2025-04-06 02:17:39
The Johnathan Walkerbanking giant UBS has agreed to purchase Credit Suisse, a smaller rival, Swiss authorities announced on Sunday. The historic deal comes as major financial institutions continue to grapple with the fallout from the sudden collapse of Silicon Valley Bank earlier this month, and work to stave off a broader crisis.
"This takeover was made possible with the support of the Swiss federal government, the Swiss Financial Market Supervisory Authority FINMA and the Swiss National Bank," the Swiss National Bank said in a statement. "With the takeover of Credit Suisse by UBS, a solution has been found to secure financial stability and protect the Swiss economy in this exceptional situation."
UBS will buy Credit Suisse for more than $3 billion, Credit Suisse said in a news release detailing the purchase, which is expected to be completed by the end of 2023. All of the bank's current shareholders will receive one share of UBS for around 22 1/2 shares of Credit Suisse, according to the release.
In a statement, Axel P. Lehmann, the chairman of Credit Suisse's board of directors, said "the announced merger represents the best available outcome," citing "recent extraordinary and unprecedented circumstances."
"This has been an extremely challenging time for Credit Suisse and while the team has worked tirelessly to address many significant legacy issues and execute on its new strategy, we are forced to reach a solution today that provides a durable outcome," Lehmann's added.
At a news conference held Sunday afternoon to discuss the emergency purchase, Karin Keller-Sutter, president of FINMA, said "Switzerland has to take responsibilities beyond its own borders," and added that the deal was reached in an effort to avoid "irreparable economic turmoil in Switzerland and throughout the world." Keller-Sutter said the purchase "laid the foundations for greater stability both in Switzerland and internationally."
Fears about the stability of the global banking system spread across the U.S. and Europe in the wake of Silicon Valley Bank and Signature Bank's failures, which happened less than two weeks ago ago and within days of each other. Their closures prompted rare moves by the federal government as well as some of the largest U.S. banks to shore up finances at institutions that became threatened in the turmoil.
Credit Suisse received almost $54 billion last week from the Swiss national bank as part of those negotiations, while a consortium of 11 massive U.S. banks, including Bank of America, Citigroup, JPMorgan Chase and Wells Fargo, agreed to provide $30 billion in funding for First Republic Bank. Those four banks each agreed to contribute $5 billion, while Goldman Sachs and Morgan Stanley each agreed to give $2.5 billion and BNY Mellon, PNC Bank, State Street, Truist and U.S. Bank each agreed to give $1 billion.
The pledges of emergency funding on Thursday briefly interrupted what had been ongoing downturns in both banks' stocks, which resumed the following day. On Friday, Credit Suisse's share price slipped 7% and ended the day at $2.01.
For Credit Suisse, Switzerland's second-largest commercial bank, shares dropped 30% on the SIX stock exchange after its largest shareholder said it would not put any more money into the institution. The bank had faced problems before the U.S. banks' failures gave rise to fear and a lack of confidence among big investors, and it announced its plans to borrow up to 50 billion francs from the national bank on Thursday.
"This additional liquidity would support Credit Suisse's core businesses and clients as Credit Suisse takes the necessary steps to create a simpler and more focused bank built around client needs," said Credit Suisse in a statement at the time.
The steep drop-off in its share prices one day earlier marked a record-low for Credit Suisse, after the Saudi National Bank told news outlets that it would not inject additional funds into the institution as it sought to avoid regulations that would become applicable with a stake in the Swiss lender above 10%. That upheaval caused an automatic freeze in trading of shares of Credit Suisse on the Swiss market and significantly impacted shares of other large European banks, with some share prices falling by double-digits.
Despite the Swiss national bank's move to shore up finances at Credit Suisse, analysts at Capital Economics said concerns remained about the health of the institution, especially since it has not been profitable in two years.
Andrew Kenningham, the chief Europe economist at Capital Economics, said in an investor note on Friday that, while Credit Suisse has a plan to restore business over the course of three years, "it is uncertain whether markets will give it that long."
- In:
- Silicon Valley Bank
- Finance
- Switzerland
veryGood! (5)
Related
- At site of suspected mass killings, Syrians recall horrors, hope for answers
- Get 90% Off J.Crew, $211 Off NuFACE Toning Devices, $150 Off Le Creuset Pans & More Weekend Deals
- NFL draft: History of quarterbacks selected No. 1 overall, from Bryce Young to Angelo Bertelli
- Taylor Swift name-drops Patti Smith and Dylan Thomas on new song. Here’s why
- The 401(k) millionaires club keeps growing. We'll tell you how to join.
- Off the Grid: Sally breaks down USA TODAY's daily crossword puzzle, No Resolution
- Look what you made her do: Taylor Swift is an American icon, regardless of what you think
- Netflix to stop reporting quarterly subscriber numbers in 2025
- Buckingham Palace staff under investigation for 'bar brawl'
- Would you like a cicada salad? The monstrous little noisemakers descend on a New Orleans menu
Ranking
- Military service academies see drop in reported sexual assaults after alarming surge
- '30 Rock' actor Maulik Pancholy speaks out after school board cancels author visit
- NHL playoffs bracket 2024: What are the first round series in Stanley Cup playoffs?
- Remains of an Illinois soldier who died during WWII at a Japanese POW camp identified, military says
- Man can't find second winning lottery ticket, sues over $394 million jackpot, lawsuit says
- Poland's Duda is latest foreign leader to meet with Trump as U.S. allies hedge their bets on November election
- Model Iskra Lawrence Is Pregnant, Expecting Baby No. 2 With Boyfriend Philip Payne
- Northern Ireland prosecutor says UK soldiers involved in Bloody Sunday won’t face perjury charges
Recommendation
New Mexico governor seeks funding to recycle fracking water, expand preschool, treat mental health
Did Zendaya Just Untangle the Web of When She Started Dating Tom Holland? Here's Why Fans Think So
USA TODAY coupons: Hundreds of ways to save thousands of dollars each week
She used Grammarly to proofread her paper. Now she's accused of 'unintentionally cheating.'
Head of the Federal Aviation Administration to resign, allowing Trump to pick his successor
Taylor Swift Proves Travis Kelce Is the MVP of Her Heart in These Tortured Poets Department Songs
More remains found along Lake Michigan linked to murder of college student Sade Robinson
4 suspects in murder of Kansas moms denied bond