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Topline
UBS on Friday said it has terminated an agreement with the Swiss government to shield it from losses linked to its emergency rescue of Credit Suisse, a move that should calm the fractious political debate over the state’s involvement and suggests the complicated takeover is going to plan.
UBS took over Credit Suisse in March.
AFP via Getty Images
Key Facts
UBS said it had voluntarily terminated a $10.3 billion government backstop to limit potential losses from the emergency takeover.
The politically contentious guarantee would have protected the Swiss bank from further losses on the deal once it had passed a roughly $5.7 billion threshold.
UBS said it had also ended emergency liquidity lines offered by Switzerland’s central bank to keep Credit Suisse afloat, valued at around $114 billion, and that Credit Suisse had fully repaid an emergency loan of around $57 billion to the Swiss National Bank.
UBS said it paid a total of around $830 million to Swiss authorities in fees and costs linked to the backstop and other lifelines.
The bank said the decision followed “a comprehensive assessment” of Credit Suisse’s assets, including “severe stress loss scenarios.”
The measures “contributed to the stabilization of Credit Suisse and financial stability in Switzerland and globally,” UBS said, adding that it “continues to focus on the successful execution of the integration of Credit Suisse.”
News Peg
UBS announced plans to take over its ailing Swiss rival in March. The shotgun wedding, brokered by the Swiss government, was a last-ditch effort to save the stricken bank as it teetered on the brink of collapse and soothe the fractious financial markets that were roiling over the prospect of such an important financial institution—long considered too big and too important to fail—going under. The government’s financial guarantees, as well as the broader ramifications such as potential job losses that come with two national heavyweights merging, sparked political turmoil in Switzerland.
What To Watch For
It’s not precisely clear how UBS plans to integrate Credit Suisse into its operations, though the bank has reportedly begun the process of killing off its rival’s international brand, according to the Financial Times. This includes replacing signs and iconography for Credit Suisse and effectively ending more than 160 years of the institution’s history. It’s possible the bank will spin off Credit Suisse’s domestic business, a decision it’s reportedly expected to announce at the end of August.
Big Number
$3.2 billion. That’s how much UBS bought Credit Suisse for in March, an enormous discount considering the bank’s market capitalization.
Tangent
UBS shares were up around 5% during trading on Friday morning.
Further Reading
UBS Warns Rushed Credit Suisse Rescue Could Be ‘Considerably More Difficult And Risky’ Than Expected (Forbes)
UBS starts process of killing off Credit Suisse brand (Financial Times)
Credit Suisse Workers Gear Up To Sue Swiss Regulator Over $400 Million In Lost Bonuses, Report Says (Forbes)
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