March 25, 2023

Red carpet for the big bank bailout in Switzerland this Sunday. UBS buys Credit Suisse for 3,041 million Swiss francs (3,080 million euros) in a share swap that values ​​the troubled bank’s shares at 0.76 francs, 59% below its Friday close. But beyond the consideration that the entity’s shareholders will receive -led by Saudi Arabia and Qatar-, the wedding of the year in the banking sector contains a whole series of guarantees and capital endowment valued at up to 25,000 million Swiss francs from which the rescuer will benefit.

The president of the Swiss Confederation, Alain Berset, the president of UBS, Colm Kelleher, and the president of Credit Suisse, Axel Lehmann, have announced the merger this Sunday with the support of the central bank SNB and the supervisor Finma in an operation aimed at recover the confidence lost after two weeks of banking turbulence in the markets. “We are totally committed to the operation. There are no options to back out. This merger will be successful and will be executed,” Kelleher, who will be the president of the combined entity, has assured at the press conference, while the CEO of UBS, Ralph Hamers will also maintain his royal role by moving to the top of Credit Suisse.

The key to the ubs-credit suisse merger

Exchange of shares of 1 UBS share for every 22.48 of Credit Suisse, valued at 3,041 million and write-offs The SNB opens a special liquidity line of up to 100,000 million francs to cover the merger

Under the terms of the transaction, Credit Suisse shareholders will receive 1 UBS share for every 22.48 Credit Suisse shares in a merger that values ​​the entity at just 3 billion francs. The SNB will deploy a special liquidity window at the central bank for up to 100 billion Swiss francs that will eliminate any kind of uncertainty. But the most relevant thing is hidden in the dowry that accompanies Credit Suisse so that UBS will keep it despite initial reluctance.

UBS will benefit from 25,000 million Swiss francs of capital of public-private origin, in the form of a 9,000 million scheme of public anti-loss scheme for the holes that may arise and, in addition, the convertible contingent bonds will be activated by (Covalor) of 16,000 million francs to be injected into the balance of Credit Suisse to recapitalize it. It will therefore be a ‘bail-in’ (self-rescue charged to bondholders and shareholders) and a ‘bail-out’ (with taxpayer participation).

The combination of the two banks is expected to generate synergies worth more than 8,000 million euros until 2027, due to the fact that UBS plans to cut as much as possible the investment banking division of Credit Suisse in the US, which was being one of the major obstacles to the merger. The combined investment banking businesses of both firms will represent 25% of the group’s risk-weighted assets. The new giant will control a third of the shares of Six Group BME, the operator of the Zurich, Madrid, Barcelona, ​​Bilbao and Valencia Stock Exchanges.

Proforma, with data at the end of 2022, the new UBS (with Credit Suisse) will have an asset perimeter of 1.6 trillion euros, equivalent to the size of the Spanish Banco Santander, with a market capitalization of 68,000 million euros at the end of the year. Friday. At the end of last year, the volume of deposits in the two entities amounted to 726,000 million euros and had some 647.00 million in loans. The interest margin rises to 49,000 million.

In addition, the new bank will be one of the largest Wall Street and investment banking groups in Europe with a combined business of more than 5 trillion euros in total invested assets and a manager of investment funds and client portfolios with more than 3.4 trillion in assets (AUM) that make it the largest investment firm in Europe

It rivals the great US titans in this segment such as Blackrock, Capital Group or Vanguard, as well as the French company Amundi. It will also compete on another level now against Goldman Sachs, Morgan Stanley, JPMorgan, Citi or Deutsche Bank in commissions for corporate operations, debt issues and company IPOs.

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