UBS Group AG is in talks to acquire all or part of Credit Suisse Group AG, potentially involving a government backstop, part of an urgent effort by Swiss and global authorities to restore confidence in the banking system, people said who are familiar with the situation.
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Credit Suisse took a more than $50 billion liquidity lifeline from the Swiss National Bank this week after concerns about its outlook deepened. The move didn’t do enough to halt the fall in Credit Suisse’s shares or reverse the loss of bank deposits, forcing Switzerland’s central bank and top financial regulator to organize talks with Credit Suisse’s bigger rival, UBS .
The banks have discussed a number of scenarios, including UBS acquiring all or part of Credit Suisse, according to those familiar with the situation.
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UBS has long been seen as part of any state-backed solution for Credit Suisse, which has a balance sheet roughly half the size of UBS’ total assets of $1.1 trillion. Any large-scale acquisition would bring UBS valued companies within Credit Suisse, such as asset clients in Asia and the Middle East, but could come up with less desirable entities like Credit Suisse’s troubled investment bank. It could also derail UBS’ existing strategy and perceived stability among investors.
UBS has a market cap of about $65 billion, according to FactSet, versus Credit Suisse’s $8 billion.
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Both banks are considered systemically important in Switzerland and globally, and a combination may be subject to additional supervision and capital requirements.
Swiss authorities are expected to reach at least a rough deal before the market opens on Monday. A spokesperson for financial regulator Finma and the SNB declined to comment. A spokeswoman for the Treasury Department said it would not comment on rumours.
The talks, previously reported by the Financial Times, may not lead to a transaction between Credit Suisse and UBS. They are the two largest banks by assets in Switzerland, serving depositors and businesses there, and wealthy clients around the world. Both have Wall Street investment banks and major asset management divisions.
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UBS may not be the only player in the mix. Other financial institutions are looking into the situation to see if they can buy parts of Credit Suisse or reverse bids, people familiar with those efforts said.
Major asset managers have long coveted some of the bank’s investment businesses, including its European real estate and US asset management divisions. Credit Suisse executives have repeatedly rejected those offers, arguing that asset management was a core part of its business.
Credit Suisse’s slide into state aid came after other banks and major investors pulled out of doing business with the Swiss lender last week. Other investment firms stopped trading with the bank in the fall as its years of trouble worsened, people familiar with the matter said.
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Analysts are concerned about wealthy clients pulling in their money. Executives at other banks said they received inflows from Credit Suisse clients last week.
Using UBS to bail out Credit Suisse marks a turnaround from nearly 15 years ago when Switzerland bailed out UBS after it got bogged down with billions of toxic assets in its US operations. Credit Suisse rejected state aid at the time and came out of the crisis stronger.
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It was then battered by tighter financial regulations and costly settlements with regulators. The bank underwent a series of restructurings. Credit Suisse’s newest management team, some of whom previously worked at UBS, had requested more time to prove they could turn things around.
—Patricia Kowsmann contributed to this article.
Write to Justin Baer [email protected]Margot Patrick op [email protected] and Ben Dummett on [email protected]