Investment banking company UBS was considering the potential impact of buying struggling rival Credit Suisse as early as December, months before the takeover was hastily arranged by Swiss authorities in March, according to a regulatory filing.
UBS’s Early Considerations
The filing with the U.S. Securities and Exchange Commission (SEC) revealed that UBS concluded in February that acquiring Credit Suisse was not desirable, but it should prepare in case its rival encountered “serious financial difficulties.”
This disclosure provides the clearest insight yet into UBS’s thinking, showing it had been looking at its struggling competitor months before the rescue deal orchestrated by Swiss authorities.
In March, the investment banker agreed to take over Credit Suisse for 3 billion Swiss francs ($3.4 billion) and said it would assume up to 5 billion francs in losses, as part of a rescue backed by as much as 250 billion francs of state support.
In February, Switzerland’s financial regulator FINMA said it was closely monitoring Credit Suisse given its “significant” outflows, but noted the stabilizing effect of its liquidity buffers.
Only days before the rescue, the regulator and the central bank, while pledging funding if necessary, still judged Credit Suisse remained sound.
They stepped in after clients, unsettled by market turmoil unleashed by the collapse of two mid-sized U.S. lenders, kept pulling money from the scandal-plagued 167-year-old institution.
Racing to Close the Takeover
Since then, the Swiss authorities and UBS have been racing to close the takeover as soon as possible in an effort to retain Credit Suisse’s clients and employees. UBS Chief Executive Sergio Ermotti said the bank aimed to close the deal by the end of May or early June.
UBS noted in the filing that the merger still required approval from regulators in the European Union, India, Japan, Mexico, and South Korea.
In March 2023, UBS secured temporary approval from European Union antitrust regulators, while the U.S. Federal Reserve approved the UBS Group’s acquisition of Credit Suisse’s U.S. associates.
The filing also said the merger could be terminated if its “closing conditions have not been satisfied” by December, but any missing regulatory approvals would not be treated as a breach of those conditions by UBS.
Ermotti on Credit Suisse’s Swiss Business
Ermotti also repeated his bank’s line that all options were still on the table concerning Credit Suisse’s Swiss business. On Sunday, NZZ am Sonntag newspaper reported that UBS was working towards spinning off Credit Suisse’s domestic unit, with its current head, Andre Helfenstein, expected to run it.
Ermotti said it was too early to put a figure on how many jobs would be cut as a result of the merger. “Job cuts will not be avoidable,” he said.
The company reported net profit of $1.03 billion for the first quarter, below analyst expectations of a net profit near $1.75 billion for the period, due to increased provisions of $665 million following a U.S. residential mortgage-backed securities litigation matter.
Despite the hit in net income, Ermotti described the latest results as “very solid” and emphasized UBS’s role as a source of stability in the wake of the Credit Suisse acquisition.
