The announcement comes in the wake of an exodus of Credit Suisse’s shareholders, which also directly coincides with formal probes by governments such as the U.S. and a wave of media investigations exposing the bank as a safe haven of choice for unsavory clients.
Excerpts from the bank’s 2022 annual report documented “significantly higher withdrawals of cash deposits” from late last year and that “customer deposits declined by CHF 138 billion ($148.3 billion)” in the same quarter.
The bank had been operating for a second consecutive year in the red. Despite its downturn in fortunes, bank executives admitted in the annual report that it did not expect to turn a profit anytime soon and that the continuing flight of its clients would almost certainly result in a “substantial loss before taxes in 2023.”
All in all, Credit Suisse was in the midst of its largest annual loss since the 2008 financial crisis.
The bank’s share price nose dived by as much as 30% last Wednesday, a crisis which led to the Swiss National Bank and the financial regulator Finma stating their readiness to provide a liquidity backstop to the Swiss banking giant.
But a credit line of $54 billion from the Swiss central bank failed to stop the bleeding, resulting in the bank’s forced acquisition over the weekend by UBS for $3.2 billion.
“On Friday, the liquidity outflows and market volatility showed it was no longer possible to restore market confidence, and that a swift and stabilising solution was absolutely necessary,” Swiss president Alain Berset said at a press conference in Bern Sunday evening. “This solution is the takeover of Credit Suisse by UBS.”
After some negotiating, the agreed purchase price between UBS and Credit Suisse will see the Swiss banking giant sold for pennies on the dollar, 60% less than its closing share price from Friday last week. The sale is not subject to shareholder approval.
The move is backed by the Swiss Federal Department of Finance, FINMA and the Swiss National Bank.
“This acquisition is attractive for UBS shareholders,” said UBS Chairman Colm Kelleher, “but, let us be clear, as far as Credit Suisse is concerned, this is an emergency rescue.”
