Official announcement: UBS acquires Credit Suisse for 3 billion Swiss francs

According to reports, under the mediation of the Swiss government, UBS agreed to acquire rival Credit Suisse for 3 billion Swiss francs and agreed to bear losses of up to $5.4 billion. UBS said that the 22.48 shares held by its shareholders would be exchanged for one UBS share, equivalent to 0.76 Swiss francs per share, for a total consideration of 3 billion Swiss francs. The transaction is expected to be completed by the end of 2023, with annual cost savings of approximately $7 billion by 2027. The Swiss Central Bank said it would provide liquidity assistance of 100 billion Swiss francs ($108 billion) to the merged banks. The Swiss Financial Market Supervisory Authority (FINMA) stated that all business activities of the two banks would likely continue without restriction or interruption. With the support of the Swiss government, Credit Suisse’s additional Tier 1 capital bond (AT1) with a nominal value of approximately 16 billion Swiss francs ($17.2 billion) will be fully written down.

Interpretation of this information:

UBS has reportedly agreed to acquire Credit Suisse, its rival, for 3 billion Swiss francs. As a part of the deal, UBS has agreed to bear losses of up to $5.4 billion, while Credit Suisse’s additional Tier 1 capital bond will be fully written down. The Swiss Central Bank is to provide liquidity assistance of 100 billion Swiss francs to the merged banks. This transaction is expected to be completed by the end of 2023, with annual cost savings of approximately $7 billion projected to be realized by 2027.

This announcement comes amidst a turbulent time for Credit Suisse, as the bank has recently faced significant losses due to the Greensill Capital scandal, which resulted in the bank’s CEO resigning. This acquisition by UBS is seen as a strategic move to solidify its position in the Swiss banking industry, as Credit Suisse was one of its main competitors.

Furthermore, this acquisition is expected to lead to significant cost savings and synergies between the two banks. This could result in several operational and financial benefits, including economies of scale, increased market share, and enhanced profitability. However, the deal is still subject to regulatory approvals and due diligence, which could result in unforeseen delays or complications.

Overall, the acquisition of Credit Suisse by UBS could lead to significant changes in the Swiss banking industry and further consolidation among Swiss banks. Additionally, this acquisition could have broader implications for the global banking industry, as it could set the stage for further mergers and acquisitions in a post-pandemic environment where many banks are facing significant challenges.