The Paper reporter Wang Huirong
With the government's good offices, the acquisition of Switzerland's two largest banks finally came to an end. UBS acquired Credit Suisse for CHF 30 billion (US$32.2023 billion), and the transaction is expected to close by the end of <>.
On the evening of March 3, local time, UBS issued a press release on its official website saying that according to the terms of the all-share transaction, 19.22 shares of Credit Suisse held by Credit Suisse shareholders will be exchanged for 48 share of UBS shares, equivalent to 1.0 Swiss francs per share, for a total consideration of 76 billion Swiss francs (about 30.32 billion US dollars). UBS will receive CHF 250 billion of downside protection from the transaction to support the subject matter, purchase price adjustment and restructuring costs, as well as an additional 50% of non-core assets. Both UBS and Credit Suisse have unrestricted access to existing instruments from the Swiss National Bank. Through these instruments, the two banks can obtain liquidity from the SNB in accordance with the guidelines of monetary policy instruments.
UBS said the combination of the two companies is expected to generate more than $2027 billion in annual run-rate of cost reductions by 80. UBS Investment Bank will strengthen its global competitive position among institutional, corporate and wealth management clients by accelerating the achievement of its strategic objectives in global banking, while reducing other businesses of Credit Suisse Investment Bank, which together represents approximately 25% of the Group's risk-weighted assets.
UBS expects the deal to increase earnings per share by 2027, and the bank's capital adequacy ratio remains well above its 13 percent target.
UBS Chairman Colm Kelleher will serve as chairman of the combined entity, and UBS CEO Ralph Hamers will serve as CEO of the combined entity.
UBS said the deal did not require shareholder approval. UBS has obtained prior agreements from the Swiss Financial Market Supervisory Authority (FINMA), the Swiss National Bank, the Swiss Federal Ministry of Finance and other core regulators in order to approve transactions in a timely manner.
According to foreign media reports, "This is a commercial solution, not a rescue." Swiss Finance Minister Karin Keller-Sutter said at a press conference on March 3 local time.
On the same day, the SNB issued two press releases in a row, saying that the SNB provided substantial liquidity assistance to support UBS's acquisition of Credit Suisse, and coordinated actions by central banks to strengthen the provision of US dollar liquidity.
The SNB said that with the acquisition of Credit Suisse by UBS, a solution has been found to ensure financial stability and protect the Swiss economy in this particular situation. Both banks have unrestricted access to the SNB's existing instruments to obtain liquidity from the SNB in accordance with the Monetary Policy Tools Guide.
The SNB mentioned that under the emergency decree of the Swiss Federal Council, Credit Suisse and UBS can obtain liquidity assistance loans totaling up to CHF 1000 billion in the event of bankruptcy. In addition, the SNB can provide a liquidity assistance loan of up to CHF 1000 billion to Credit Suisse, with a federal default guarantee. The structure of the loan is based on the Public Liquidity Guarantee (PLB), the key parameters of which have been decided by the Swiss Federal Council in 2022.
According to the SNB, the provision of large amounts of liquidity will ensure that both banks have access to the necessary liquidity. By providing substantial liquidity assistance, the SNB is fulfilling its mission to contribute to the stability of the financial system and will continue to work closely with the Swiss Federal Government and FINMA to this end.
Another press release issued by the SNB mentioned that the Bank of Canada (Bank of Canada), the Bank of England (Bank of England), the Bank of Japan (Bank of Japan), the European Central Bank, the Federal Reserve and the SNB announced a coordinated action on March 3 to enhance the provision of liquidity through a US dollar liquidity swap agreement. In order to improve the effectiveness of swap lines in providing dollar funds, central banks that currently provide dollar operations have agreed to increase the frequency of 19-day expiry operations from weekly to daily. These daily operations will begin on Monday, March 7 and will continue at least until the end of April.
On March 3, local time, Credit Suisse issued a press release on its official website, and with the intervention of the Swiss Federal Ministry of Finance, the Swiss National Bank and FINMA, Credit Suisse and UBS signed a merger agreement on the same day. Upon completion of the merger transaction, UBS will become the surviving entity. Pending the completion of the merger, Credit Suisse will continue to operate as normal and work with UBS to implement restructuring measures. According to an emergency decree issued by the Swiss Federal Council, a merger can be implemented without shareholder approval. Completion of the merger remains subject to customary closing conditions and is expected to close by the end of 19. In addition, UBS expressed confidence in continuing to employ Credit Suisse employees.
Axel P. Lehmann, Chairman of Credit Suisse's Board of Directors, said, "Given the extraordinary and unprecedented circumstances of recent times, the announced merger is the best outcome at this time. It has been an extremely challenging time for Credit Suisse, and while our team has been working tirelessly to address many significant legacy issues and execute its new strategy, we are forced to arrive at a solution today that delivers lasting results. ”
Colm Kelleher, chairman of UBS, said: "This acquisition is attractive to UBS shareholders, but let's be clear that as far as Credit Suisse is concerned, this is an emergency rescue. We have arranged a transaction to limit our downside risk while preserving residual value of the business. The acquisition of Credit Suisse's capabilities in wealth, asset management and Swiss universal banking will strengthen UBS's strategy to develop its capital-light business. The transaction will bring benefits to our clients and create long-term sustainable value for our investors. ”
Previously, after the collapse of US banks such as Silicon Valley Bank (SVB) and Signature Bank, panicked investors sold Credit Suisse stocks and bonds, which shocked financial markets such as Europe and the United States. Foreign media have reported that the liquidity support measures introduced by the SNB this week briefly halted the decline, but "this farce" carries the risk that customers or counterparties continue to flee, which could have an impact on the entire banking industry.
On March 3, local time, Silicon Valley Bank failed after suffering a deposit run, becoming the second largest bank failure in US history. On March 10, local time, the US regulator also announced a similar systemic risk situation for the signature bank, and said that the bank has been closed by the New York state regulator, all depositors will be fully compensated, and taxpayers will not bear any losses. On March 3, large European banks listed on U.S. stocks at the same time continued the plunge in European stocks, with Credit Suisse falling more than 12% at one point and Deutsche Bank falling about 3%. Since then, the SNB and the Swiss Financial Market Supervisory Authority have issued a joint statement saying that the problems of certain US banks do not pose a direct contagion risk to the Swiss financial market. Credit Suisse meets capital and liquidity requirements for systemically important banks. If necessary, the Swiss National Bank will provide liquidity support to Credit Suisse.