UBS against the clock in Credit Suisse takeover talks

ZURICH — UBS was up against the clock Sunday in talks to finalise a mammoth takeover of its troubled rival Swiss bank Credit Suisse and reassure investors before the markets reopen.

Switzerland's biggest bank UBS is being urged by the authorities to get a deal over the line in a bid to avoid a wave of contagious panic on the markets Monday, according to several media reports.

The wealthy Alpine nation's largest banks have been in urgent negotiations throughout the weekend, with the government, central bank and financial regulators all involved.

The 20 Minuten newspaper filmed members of the Swiss government, including President Alain Berset, heading into the finance ministry in Bern early Sunday, with the Swiss news agency ATS reporting that the building's window shutters had been lowered.

Blick newspaper said UBS will buy Credit Suisse in a deal to be sealed later Sunday in Bern at a meeting featuring the government and the banks' executives.

A merger of this scale — involving swallowing up all or part of a bank arousing growing investor unease — would normally take months. UBS will have had a few days.

However, the Swiss authorities felt they had no choice but to push UBS into overcoming its reluctance, due to the enormous pressure exerted by Switzerland's major economic and financial partners, fearing for their own financial centres, said Blick.

"When the stock market opens on Monday, Credit Suisse could be a thing of the past," the tabloid said.

While under Swiss rules, UBS would typically have to consult shareholders over six weeks, it could use emergency measures to skip the consultation period and a shareholder vote, the Financial Times newspaper said, citing unnamed sources.

UBS would require public guarantees to cover legal costs and potential losses, according to a report by Bloomberg, citing anonymous sources.

Credit Suisse, the country's SNB central bank and the Swiss financial watchdog FINMA all declined to comment on the negotiations when contacted by AFP.

The government did not immediately respond when contacted by AFP Sunday.

The SonntagsZeitung newspaper called it "the merger of the century".

"The unthinkable becomes true: Credit Suisse is about to be taken over by UBS," the weekly said.

The government, FINMA and the SNB "see no other option", it claimed.

"The pressure from abroad had become too great — and the fear that the reeling Credit Suisse could trigger a global financial crisis," it said.

Like UBS, Credit Suisse is one of 30 banks around the world deemed to be Global Systemically Important Banks — of such importance to the international banking system that they are deemed too big to fail.

But the market movement seemed to suggest the bank was being perceived as a weak link in the chain.

"We are now awaiting a definitive and structural solution to the problems of this bank," French Finance Minister Bruno Le Maire told Le Parisien newspaper. "We remain extremely vigilant."

According to the FT, Credit Suisse customers withdrew 10 billion Swiss francs ($10.8 billion) in deposits in a single day late last week — a measure of how far trust in the bank has fallen.

After a turbulent week on the stock market, which forced the SNB to step in with a $54-billion lifeline, Credit Suisse was worth just over $8.7 billion by Friday evening — precious little for a bank considered one of 30 key institutions worldwide.

FINMA and the SNB said Credit Suisse "meets the capital and liquidity requirements" imposed on such banks, but mistrust remains.

Amid fears of contagion after the collapse of two US banks, Credit Suisse's share price plunged by more than 30 per cent on Wednesday to a new record low of 1.55 Swiss francs.

After recovering some ground on Thursday, its shares closed down 8 per cent on Friday, at 1.86 Swiss francs as the Zurich-based lender struggled to retain investor confidence.

Credit Suisse has been plagued by a series of scandals in recent years. Shares were worth 12.78 Swiss francs in February 2021.

In 2022, the bank suffered a net loss of $7.9 billion and expects a "substantial" pre-tax loss this year. 

The notion of Switzerland's biggest banks joining forces has cropped up over the years but has generally been dismissed due to competition issues and risks to the Swiss financial system's stability.

"The Credit Suisse management, even if forced to do so by the authorities, would only choose [this option] if they have no other solution," said David Benamou, chief investment officer of Paris-based Axiom Alternative Investments.