UBS considers acquiring Credit Suisse with potential Swiss government guarantees

According to two persons with knowledge of the situation on Saturday, UBS is considering a purchase of Credit Suisse that may include the Swiss government providing a guarantee against the risks involved.

According to the sources, UBS was being pressured to conduct a takeover by the Swiss government. The Swiss division of Credit Suisse may be split off under the idea, they continued.

When contacted by Reuters, UBS, Credit Suisse, and Switzerland's financial watchdog FINMA all refused to comment.

As the ailing bank entered a crucial weekend, regulators encouraged Credit Suisse Group to explore a transaction with Swiss rival UBS after several competitors were wary of doing business with it.

Meetings will be held over the weekend by Credit Suisse Chief Financial Officer Dixit Joshi and his teams to discuss the bank's options, according to persons with knowledge of the situation on Friday.

The 167-year-old Swiss bank had to access $54 billion in central bank financing as a result of the market instability caused by the failure of American lenders Silicon Valley Bank and Signature Bank during the last week.

UBS, which dates back to the middle of the nineteenth century, is the largest bank in Switzerland and the largest wealth manager in the world, with a market value of 60 billion Swiss francs ($65 billion).

With a crackdown on banking secrecy and a rescue during the global financial crisis more than ten years ago, UBS has seen some of its own turbulent times.

To lower risk and increase returns, it underwent many restructurings, eliminating thousands of positions and reducing the size of the investment bank.

Ralph Hamers, the chief executive of UBS, said earlier this week that he was more concerned with organic development than M&A.

He abandoned a $1.4 billion purchase of Wealthfront last year that would have accelerated UBS's expansion in the American market. Hamers predicted that the European banking sector will see more domestic mergers and acquisitions than cross-border consolidation also last year.

The bank has said that the future is unclear this year as the conflict in the Ukraine and the rise in interest rates undermine customer trust.

Another blemish has been added to Switzerland's image for financial stability, which UBS relies on, by the crisis at Credit Suisse.

The two lenders, whose headquarters are a short distance from one another and near Lake Zurich in the city's centre with snow-capped mountains in the distance, have long been important players in international banking.

UBS had $1.1 trillion in invested assets in its asset management division and $2.8 trillion in its worldwide wealth management business at the end of 2022, both of which were down from the previous year.

More than 72,000 individuals work there.

The $1.9 billion from investment banking was eclipsed by UBS's $5 billion pretax profit from wealth management in 2022.

UBS competed with Wall Street corporations in the purchase and sale of stocks, currencies, and bonds, earning $7.1 billion in income from securities trading in 2022. Deal advice brought in $1.6 billion for the bank.

Any collaboration would be the largest since the global financial crisis.