UBS to buy Credit Suisse to avoid banking system collapse


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Multinational investment bank UBS is set to purchase rival Credit Suisse after doubling its offer to $3 billion Swiss francs (AU$4.8 billion) in a bid to rescue the embattled lender.

The two banks have been in negotiation all weekend with the announcement arriving prior to the markets opening on Monday.

The deal includes over $160 billion in liquidity assistance for the two banks from the Swiss central bank.

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"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," the Swiss central bank says.

The completed merger is expected to create a business worth over US$5 trillion in total invested assets with UBS saying it will strengthen its position as a leading wealth manager.

Despite this, UBS' Chairman Colm Kelleher was quick to point out that while the deal was good for shareholders, this was a rescue.

"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," he says.

The Swiss Financial Market Supervisory Authority (FINMA) says it will be possible to continue all the business activities of both banks with no interruptions.

Credit Suisse shareholders will receive one UBS share for every 22.48 Credit Suisse shares held, which is equivalent to 0.76/share Swiss Francs or $1.22c/share.

The deal which is expected to be completed by the end of 2023 comes after Swiss regulators were forced to step in to prevent the crisis at Credit Suisse from spilling over into the broader financial markets.

UBS and Credit Suisse are both in a group of 30 global systematically important banks, but recent market movements suggested that Credit Suisse was seen as dragging the chain.

The banks share price plunged by over 30% last week to a new record low of 1.55 Swiss Francs following the collapse of two US banks, SVB and Signature Bank.

It is unclear whether the deal will be enough to restore trust in lenders around the world with the Australian market one of the first to be able to react to the news.

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Eliot Hastie was a senior journalist at Money magazine in early 2023. He was previously a producer and presenter at ausbiz where he covered startups, small caps, cryptocurrency and every other investible opportunity for Australians. Eliot has a Bachelor of Arts (Honours) in Journalism from the University of Westminster. He tweets at @Hastie93.