- UBS acquired Credit Suisse in a rescue takeover over the weekend.
- But Credit Suisse didn’t want to be rescued, and UBS didn’t want to have to be the rescuer.
- Execs at the rival Swiss banks couldn’t help but take sly digs at each other.
It’s official: UBS is acquiring Credit Suisse in a historic rescue takeover.
The deal was brokered by the Swiss national bank and sealed over the course of a dramatic weekend. Two fierce domestic rivals will become one. UBS will now decide which Credit Suisse businesses it wants to keep at the bank, and which of its rival’s execs could play an important role in the new UBS.
There’s still much that’s uncertain, but one thing’s clear from how this unfolded: UBS really didn’t want to have to rescue its rival, and Credit Suisse isn’t thrilled with this outcome either.
The announcements and official statements around the deal were filled with technical finance jargon around liquidity support and the like, but buried beneath the details were subtweets and sly digs.
For example, the first official word of the deal came from the Swiss National Bank, which announced: “UBS today announced the takeover of Credit Suisse.” At the time, UBS had done no such thing.
The statement went on to detail some of the extraordinary terms of the deal, saying:
“With the takeover of Credit Suisse by UBS, a solution has been found to secure financial stability and protect the Swiss economy in this exceptional situation.”
Next, Credit Suisse announced: “Credit Suisse and UBS to Merge.”
A merger! Not a rescue takeover. A merger! The statement read:
“Credit Suisse and UBS have entered into a merger agreement on Sunday following the intervention of the Swiss Federal Department of Finance, the Swiss National Bank and the Swiss Financial Market Supervisory Authority FINMA (FINMA). UBS will be the surviving entity upon closing of the merger transaction.”
The wording of “following the intervention of” makes clear this deal was not Credit Suisse’s decision. And “UBS will be the surviving entity” spells out that this is a takeover and not a merger.
The statement gives further clarity to the government’s role, going on to say the deal came after the Swiss authorities “asked both companies to conclude the transaction to restore necessary confidence in the stability of the Swiss economy and banking system.”
Credit Suisse’s statement finished with a word from its chairman Axel Lehmann (emphasis mine):
“Given recent extraordinary and unprecedented circumstances, the announced merger represents the best available outcome. This has been an extremely challenging time for Credit Suisse and while the team has worked tirelessly to address many significant legacy issues and execute on its new strategy, we are forced to reach a solution today that provides a durable outcome.”
At this point, UBS, the bank making the acquisition in this case, had not made a statement. Normally, the acquirer is the one leading the charge in announcing a transaction. Here, it was bringing up the rear.
When UBS did make a statement, it thoroughly undermined the Credit Suisse announcement. Headline: “UBS to acquire Credit Suisse.”
It was Colm Kelleher, UBS chairman and a veteran of the financial crisis, who delivered the coup de grâce. He said in a statement (emphasis mine):
“This acquisition is attractive for UBS shareholders but, let us be clear, as far as Credit Suisse is concerned, this is an emergency rescue. We have structured a transaction which will preserve the value left in the business while limiting our downside exposure.”
Credit Suisse says it’s a merger. UBS says it’s an emergency rescue. Ha! The UBS statement also confirmed that the takeover discussions were initiated by Swiss authorities.
Even a potential photo op marking the occasion was ruined by an awkward moment in which Kelleher waited to shake hands with Lehmann. (The two eventually did connect, for the record.)
—Peter Thal Larsen (@peter_tl) March 20, 2023
For UBS, acquiring Credit Suisse’s businesses in wealth, asset management, and Swiss banking promises potential benefits. The future of Credit Suisse’s investment banking business remains unclear however, with UBS promising to move the majority of its rival’s markets positions to a non-core operation that would be managed down.
[Side note: The job of combining the wealth businesses will fall to Iqbal Khan, who runs UBS wealth management and used to work at Credit Suisse. In 2019, after UBS announced Khan’s hire, the chief operating officer at Credit Suisse ordered a colleague to spy on him. Awkward!]
Later, on a call with analysts, Kelleher and UBS CEO Ralph Hamers defended the deal while simultaneously making it clear they themselves didn’t want to do, as my colleague Rebecca Ungarino reported.
“It’s a historic day in Switzerland and a day, frankly, we hoped would not come,” Kelleher said.