(Zurich) Credit Suisse must find ways to reassure the markets at all costs before they open on Monday morning, even if the second largest bank in Switzerland is one of 30 banks worldwide considered too big to fail.
Silence reigns Saturday both on the side of Credit Suisse and UBS, the number one of the Swiss bank which is presented as the buyer of choice of all or part of its rival, in the eyes of the central bank and the gendarme of the financial markets, equally discreet.
The Swiss market opens at 4:00 a.m. (Eastern time) on Monday and if nothing convinces investors that a good solution is found for an establishment that is considered a weak link, it may have an even worse day. as Wednesday, March 15.
The stock had hit a historic low of 1.55 Swiss francs (around C$2.30) and at the close Credit Suisse’s market valuation was just CHF 7 billion.
So how to reassure? Friday evening, the FinancialTimes (FT) opened the ball saying that UBS was in talks for the total or partial takeover of its rival.
The Swiss central bank (SNB) “wants a simple solution before the markets open on Monday”, assures the business daily, adding that it is not certain that an agreement can be found.
On Saturday, the FT returned to the charge claiming that the American asset management giant BlackRock also had its sights on the bank and was organizing a round. But a spokesperson strongly denied this to AFP: “BlackRock is not involved in any project to acquire all or part of Credit Suisse and sees no interest in doing so. »
The distrust of investors and partners forced the central bank to lend 50 billion Swiss francs (more than 74 billion Canadian dollars) to breathe new life into the Zurich establishment and reassure the markets.
But the respite was short-lived and buying the bank would therefore not be expensive, but an acquisition of this size is of formidable complexity, even more so when it is done in a hurry.
Redemption but of what?
Credit Suisse has just experienced two years marked by several scandals, which revealed, by management’s own admission, “substantial weaknesses” in its “internal control”. Finma had accused him of having “seriously breached his prudential obligations” in the bankruptcy of the financial company Greensill, which marked the beginning of his setbacks.
In 2022, the bank suffered a net loss of 7.3 billion Swiss francs, against the backdrop of massive withdrawals of money from its customers. It still expects a “substantial” pre-tax loss this year.
This is a bank that never seems to get its house in order,” IG analyst Chris Beauchamp commented in a market note this week.
And it’s not clear that UBS, which spent several years recovering from the shock of the 2008 financial crisis, will want to embark on further restructuring now that it’s beginning to reap the rewards of its efforts.
Again on Wednesday, its chief executive Ralph Hamers made it clear he wanted to focus on the bank’s strategy and declined to answer a hypothetical question.
The Competition Commission might also raise eyebrows.
One of the options, according to some analysts, would be to float the Swiss branch of Credit Suisse, which combines retail banking and loans to SMEs. This would also avoid massive layoffs in Switzerland because of the inevitable duplication. Only fund management and wealth management could be sold to UBS or another suitor, says the FT.
PHOTO FABRICE COFFRINI, AGENCE FRANCE-PRESSE ARCHIVES
Faster, stronger
At the end of October, Credit Suisse unveiled a vast restructuring plan including the elimination of 9,000 positions by 2025, or more than 17% of its workforce.
The bank, which employed 52,000 people at the end of October, intends to refocus on its most stable activities and radically transform its business banking.
A large part of the activities of the investment bank, which suffered heavy losses, are to be consolidated under the First Boston brand and then gradually outsourced.
But Morningstar analysts consider the restructuring both “too complex” and not thorough enough. In particular, they suggest that Credit Suisse sell its brokerage business.
Analysts at US bank JP Morgan are considering a more drastic option: for Credit Suisse to “completely” shut down its investment banking business.