UBS in talks to save Credit Suisse

Credit Suisse is in advanced talks with its larger Swiss rival UBS about a deal to salvage Switzerland's second-biggest bank, in a bid to reassure investors before the markets open next week, several media reported Saturday.

Embattled Credit Suisse was holding crisis talks this weekend and urgent meetings with national banking and regulatory authorities, said reports.

According to the Financial Times newspaper, Switzerland's largest bank UBS was negotiating to buy all or part of Credit Suisse, with the blessing of the Swiss regulators. An agreement could even be reached as early as Saturday evening, the paper reported.

The Swiss National Bank (SNB) – the country's central bank – "wants the lenders to agree on a simple and straightforward solution before markets open on Monday", the FT's source said, while acknowledging there was "no guarantee" of a deal.

Credit Suisse, the SNB and the Swiss financial watchdog Finma all declined to comment when AFP contacted them Saturday about the possibility of a UBS takeover.

An acquisition of this size is dauntingly complex.

UBS would require public guarantees to cover legal costs and potential losses, according to a report by Bloomberg, citing anonymous sources.

The Swiss competition commission could also raise eyebrows depending on how any takeover by UBS might be configured.

Too big to fail? 

The Swiss government held an urgent meeting to discuss the Credit Suisse situation on Saturday evening in the capital Bern. The government's spokesman refused to comment on the talks, Swiss news agency ATS reported.

The Neue Zurcher Zeitung newspaper said the government met at the finance ministry for a meeting that lasted around two hours, with several experts and officials taking part.

Like UBS, Credit Suisse is one of 30 banks around the world deemed to be Global Systemically Important Banks – of such importance to the international banking system that they are deemed too big to fail.

"We are now awaiting a definitive and structural solution to the problems of this bank," French Finance Minister Bruno Le Maire told Le Parisien newspaper. "We remain extremely vigilant and mobilised."

According to the FT, citing two unnamed sources, Credit Suisse customers withdrew 10 billion Swiss francs (RM48.59 billion) in deposits in a single day late last week – a measure of how trust in the bank has fallen.

After a turbulent week on the stock market, which forced the SNB to step in with a US$54 billion (RM242.22 billion) lifeline, Credit Suisse was worth just over US$8.7 billion on Friday evening – precious little for a bank considered as one of 30 key institutions worldwide.

While Finma and the SNB have said that Credit Suisse "meets the capital and liquidity requirements" imposed on such banks, mistrust remains.

Stock market plunge 

Amid fears of contagion after the collapse of two banks in the US, Credit Suisse's biggest shareholder said Wednesday it would "absolutely not" up its stake in the bank, for regulatory reasons.

That sent share prices plunging by more than 30% to a new record low of 1.55 Swiss francs.

After recovering some ground on Thursday, Credit Suisse shares closed down 8% on Friday at 1.86 Swiss francs each as the Zurich-based lender struggled to regain the confidence of investors.

All eyes are on how Credit Suisse can stop another slide once the Swiss stock exchange reopens at 0800 GMT on Monday.

Credit Suisse has been scandal-plagued for the past two years with its own management admitting "material weaknesses" in their "internal control over financial reporting".

In 2022, the bank suffered a net loss of US$7.9 billion, against the backdrop of massive withdrawals of money from its customers. It still expects a "substantial" pre-tax loss this year.

"This is a bank that never seems to get its house in order," IG analyst Chris Beauchamp commented in a market note this week.

Status quo not an option 

Analysts at financial services giant JPMorgan, insisting that "status quo is no longer an option", considered the scenario of a takeover by another bank, with UBS "the most likely".

The idea of Switzerland's biggest banks joining forces regularly resurfaces, but is generally dismissed due to competition issues and risks to the Swiss financial system's stability, given the size of the bank that would be created by such a merger.

"The question arises because there are many candidates which might be interested," said David Benamou, chief investment officer of Paris-based Axiom Alternative Investments.

"However, the Credit Suisse management, even if forced to do so by the authorities, would only choose (this option) if they have no other solution," he said.

The bank is starting to roll out its restructuring plan laid out in October, while UBS has spent several years addressing its own issues.