UBS Group (NYSE: UBS) and Credit Suisse (NYSE: CS) are reportedly in talks to merge, according to the Financial Times. This potential merger would be the most significant banking union in Europe since the 2008 Great Recession.[0] Under one likely scenario, UBS would purchase Credit Suisse to obtain its wealth and asset management units, while possibly divesting the investment banking division. The fate of Credit Suisse’s profitable Swiss universal bank is yet to be determined as it may leave the country’s domestic banking sector too concentrated.[1]
A complete union of UBS and Credit Suisse would result in the formation of one of the largest global systemically important financial institutions in all of Europe. UBS holds $1.1tn in total assets on its balance sheet, while Credit Suisse has $575bn.[2] However, UBS and Credit Suisse were said to be against the idea of a forced combination on Thursday.[3] UBS would prefer to focus on its own wealth-centric strategy and is reluctant to take on risks related to Credit Suisse.[3]
The boards of both banks are meeting separately over the weekend to discuss the situation.[0] No comment was offered by the representatives of UBS, Credit Suisse, and the Swiss finance ministry.[4] BlackRock also denied that it’s working on a possible rival bid for Credit Suisse Group AG.[5]
At the prodding of regulators, UBS has put aside its initial opposition to a deal and is exploring possible structures that could be executed quickly to halt a deep crisis of confidence.[4] UBS is asking the Swiss government to take on certain legal costs and potential future losses in any deal.[4] It has been proposed that other potential solutions could involve further divisions of Credit Suisse’s operations, or even an Initial Public Offering (IPO) of the domestic business while the wealth management and asset management parts are sold to UBS or some other interested buyer.[0]
0. “UBS and Credit Suisse Considering Possible Merger” finews.com, 18 Mar. 2023, https://www.finews.com/news/english-news/56305-ubs-credit-suisse-merger
1. “UBS, Credit Suisse not in favour of obligatory merger” Private Banker International, 17 Mar. 2023, https://www.privatebankerinternational.com/news/ubs-credit-suisse/
2. “UBS and regulators rush to seal Credit Suisse takeover deal: reports” MarketWatch, 18 Mar. 2023, https://www.marketwatch.com/story/ubs-and-regulators-rush-to-seal-credit-suisse-takeover-deal-reports-2f4ccfbc
3. “UBS is considering buying troubled Credit Suisse in what would be just the latest banking upheaval since the industry’s recent tumble into chaos” Fortune, 17 Mar. 2023, https://fortune.com/2023/03/17/ubs-credit-suisse-talks-acquisition-banking/
4. “Credit Suisse Crisis Nears Finale as UBS Discussions Heat Up” Yahoo News, 18 Mar. 2023, https://news.yahoo.com/ubs-seeks-swiss-backstop-credit-115808443.html
5. “BlackRock Not Working on Rival Bid for Credit Suisse” Bloomberg, 18 Mar. 2023, https://www.bloomberg.com/news/articles/2023-03-18/blackrock-not-working-on-rival-bid-for-credit-suisse