Crunch weekend for crisis-hit Credit Suisse

Shares of Credit Suisse fell. — AFP/File

ZURICH: Troubled Credit Suisse has two days for reassurance before markets open on Monday in anticipation of another tumultuous week in global finance.

The Zurich-based lender was holding crisis talks this weekend and holding urgent meetings with Swiss banking and regulatory authorities.

According to the Financial Times, Switzerland’s largest bank, UBS, is in talks to buy all or part of Credit Suisse, with the blessing of Swiss regulatory authorities.

The Swiss National Bank (SNB) “wants creditors to agree on a simple and straightforward solution before markets open on Monday”, the source said, admitting there was “no guarantee” of a deal.

According to a Bloomberg report, citing anonymous sources, UBS will need public guarantees to cover legal costs and potential damages.

US asset management company BlackRock was also reported to be eyeing a move for the troubled bank, but the New York-based company strongly denied this to AFP.

“BlackRock is not participating in any plan to acquire all or any part of Credit Suisse, and has no interest in doing so,” a spokesman told AFP.

After a tumultuous week in the stock market that forced the SNB to step in with a $53.7 billion lifeline, Credit Suisse was worth just over $8.7 billion on Friday evening.

But achieving this size is notoriously complicated.

‘Serious Violations’

While Swiss financial watchdogs FINMA and the SNB have said Credit Suisse “meets the capital and liquidity requirements imposed on systemically important banks”, mistrust remains.

Credit Suisse has been dogged by scandal for the past two years and its own management has admitted to “material weaknesses” in its “internal controls over financial reporting”.

FINMA accused the bank of “seriously breaching its supervisory obligations” in its dealings with notorious financier Lex Grensell and his companies.

In 2022, the bank posted a net loss of $7.9 billion, amid massive withdrawals from its customers. It still expects a “substantial” pre-tax loss this year.

“This is a bank that never gets its house in order,” IG analyst Chris Beauchamp commented in a market note this week.

Analysts who study Switzerland’s second-biggest bank predict an even tougher restructuring, the closing of its investment banking arm or even a takeover by a rival of global importance to the international banking system. Considered one in 30 to have

Amid fears of contagion following the collapse of two banks in the United States, Credit Suisse’s largest shareholder said on Wednesday it would “absolutely not” increase its stake in the bank for regulatory reasons.

The central bank’s lifeline raises questions about whether there could be an orderly bankruptcy, in which regulators would take over Credit Suisse and take charge of winding it up.

Credit Suisse’s CET1 ratio, which compares a bank’s capital to its risk-weighted assets, stood at 14.1 percent at the end of 2022 – slightly lower than HSBC but higher than BNP Paribas, one of Europe’s biggest banks. are among

Merger with UBS

It now has a lot of liquidity thanks to the SNB’s intervention.

Analysts at financial services giant JP Morgan insisted that “status is no longer an option”, considering another bank takeover scenario, with UBS “most likely”. Is.

The idea of ​​mergers of Switzerland’s largest banks regularly resurfaces, but usually due to competition concerns and threats to the stability of the Swiss financial system, the size of the bank created by such a merger is limited. Seeing it is rejected.

“The question arises because there are many candidates who might be interested,” said David Benamo, chief investment officer at Paris-based Axiom Alternative Investments.

“However, Credit Suisse’s management, even if forced to do so by the authorities, will only choose (this option) if they have no other solution,” he said.

The bank is starting its own restructuring plan, set out in October, while UBS has spent years sorting out its problems.

After the bank collapse in the United States, Credit Suisse’s credit default swaps increased.

With the SNB’s help, Credit Suisse gained “valuable time” to undertake a more radical revamp, said Morningstar analyst Johann Schultz.

He believes the current restructuring is “too complicated” and “doesn’t go far enough” to reassure funders, clients and shareholders.

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