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UBS mulls takeover of Credit Suisse with possible Swiss govt guarantees -sources

Published 03/18/2023, 08:53 AM
Updated 03/18/2023, 09:16 AM
© Reuters. The headquarters of Swiss banks UBS and Credit Suisse are seen at Paradeplatz square in Zurich, Switzerland March 16, 2023. REUTERS/Denis Balibouse

By John O'Donnell

FRANKFURT (Reuters) -UBS is examining a takeover of Credit Suisse that could see the Swiss government offer a guarantee against the risks involved, said two people with knowledge of the matter on Saturday.

The people said that UBS was coming under pressure from the Swiss authorities to carry out a takeover. Under the plan, Credit Suisse's Swiss business could be spun off, they added.

UBS, Credit Suisse, and Switzerland's financial regulator FINMA declined to comment when approached by Reuters.

Regulators have urged Credit Suisse Group to pursue a deal with Swiss rival UBS as the troubled bank began a make-or-break weekend after some rivals grew cautious in their dealings with it.

Credit Suisse Chief Financial Officer Dixit Joshi and his teams will hold meetings over the weekend to assess the bank's options, people with knowledge of the matter said on Friday.

The 167-year-old bank is the biggest name ensnared in the market turmoil unleashed by the collapse of U.S. lenders Silicon Valley Bank and Signature Bank (NASDAQ:SBNY) over the past week, forcing the Swiss bank to tap $54 billion in central bank funding.

Dating back to the mid-nineteenth century, UBS is Switzerland's biggest bank with a market value of 60 billion Swiss francs ($65 billion) and the world's largest wealth manager.

    UBS itself has had its own tumultuous periods, with a clampdown on banking secrecy and a bailout during the global financial crisis more than a decade ago.

    It went through several restructurings, cutting thousands of jobs, and pared back the investment bank to reduce risk and improve returns.

Earlier this week, UBS Chief Executive Ralph Hamers said he was focused on organic growth rather than M&A.

Last year, he backtracked on a deal to buy Wealthfront, a $1.4 billion transaction that would have fast-tracked UBS's growth in the U.S. market. Also last year, Hamers said he expected to see more local mergers and acquisitions than cross-border consolidation in the European banking industry.

The bank this year has said the outlook is uncertain as the war in Ukraine and the surge in interest rates drags down client confidence.

    The turmoil at Credit Suisse has put another dent in the Swiss reputation for financial stability on which UBS depends.

Headquartered just a few minutes' walk away from each other, not far from Lake Zurich in the centre of the city with snow-capped mountains on the horizon, the two lenders have been pillars of global finance for decades.

At the end of 2022, UBS had $2.8 trillion in invested assets in its global wealth management business and $1.1 trillion at its asset management division, both down from a year earlier. 

    It employs more than 72,000 people.

UBS's pretax profit of $5 billion from wealth management in 2022 dwarfed the $1.9 billion from investment banking. 

© Reuters. The headquarters of Swiss banks UBS and Credit Suisse are seen at Paradeplatz square in Zurich, Switzerland March 16, 2023. REUTERS/Denis Balibouse

UBS earned $7.1 billion in revenue from securities trading in 2022, competing with Wall Street firms in buying and selling stocks, currencies and bonds. The bank made $1.6 billion in revenue from advising on deals.

Any tie-up would be one of the biggest since the global financial crisis.

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