The Swiss government is set to announce a deal Sunday that will allow UBS, the largest bank in Switzerland, to buy its rival, Credit Suisse, for $2 billion, according to the Financial Times.
There have been growing concerns about the possible collapse of Credit Suisse, which could cause a crisis in the banking sector. Credit Suisse saw its stock price plunge and deposit outflows fall last week despite a $54 billion financial lifeline from the Swiss National Bank to bolster its liquidity. The deal was first reported by the Financial Times.
The deal was delayed on Sunday because regulators faced a sense of urgency to push through on Sunday, as the specter of Credit Suisse failing next week loomed over the negotiations. Credit Suisse, which has been in business for 167 years, has heightened concerns about how global financial markets would react to its implosion, one of 30 globally systemically important banks that have been in business for 167 years.
The Swiss government's financial regulators gave it the green light after the sides came to an agreement on the more complex terms of the deal after talks about UBS' potential acquisition of Credit Suisse heated up over the weekend.
Credit Suisse has an investment banking arm which it has tried to spin off, in addition to a local retail bank, which is a large global financial institution. The acquisition of those divisions of Credit Suisse, in whole or in part, could create additional regulatory complexity for the firm, given its own activities in those areas.
The deal's terms may be revealed later in the day at a press conference that Swiss authorities announced earlier in the day.
The bank has investment and local banking divisions that overlap with UBS' operations and Credit Suisse has pledged to cut 9,000 jobs as part of its restructuring.
According to Bloomberg, Credit Suisse balked at UBS' initial offer of $1 billion and argued that it fell well short of the firm's valuation, which stood at $9.5 billion as of Friday, and that it would harm the bank's employees and shareholders. The Financial Times reported the size of the UBS offer.
UBS has a balance sheet of $1.1 trillion, roughly twice the size of Credit Suisse, and has been more resilient than Credit Suisse in the years since the 2008 financial crisis.
Credit Suisse's distressed financial position resulted from billions of dollars in losses due to investments gone awry and fines imposed by regulators. Its assets dropped from $1.2 trillion in the third quarter of 2008 to $576 billion in the fourth quarter of 2022.
It is currently facing class action lawsuits from U.S. shareholders who allege that the company's leadership made false and misleading statements about the status of depositors outflows last year.
The lawsuits allege that the bank's executives failed to disclose material weaknesses in the firm's internal financial controls that made them not effective in 2021 and 2022, as revealed in the bank's latest annual report.