Credit Suisse
What’s going to happen?
Jack Mott
Acquisitions and takeovers are common in the financial world and on the 19th of March 2023 UBS, an investment bank from Switzerland, announced that they would be acquiring Credit Suisse. Credit Suisse is another investment bank from Switzerland. With UBS being the largest bank in Switzerland and Credit Suisse being the second, there have to be extreme reasons for the Swiss government to allow for this acquisition and the reduction of competition.
Credit Suisse is a multinational investment bank and finance company with its headquarters in Zurich, Switzerland. It has grown into a global organisation with operations in more than 50 countries. The company offers a broad range of services to individuals, corporations, and institutions, including private banking, investment banking, asset management, and retail banking. Credit Suisse is widely regarded as a leading player in the global banking and finance industry. However, in the last decade they have made many bad investments, including a hedge fund Archegos, they currently have only 10% of their assets covered by equity due to the complete lack of faith by shareholders.
Whereas, UBS is a multinational investment banking and finance company also based in Zurich, Switzerland. UBS is in the top 30 for largest banks in the world and one of the most well-respected financial institutions in the world. UBS operates in over 50 countries and provides a wide range of services to individuals, corporations, and institutions, including wealth management, asset management, investment banking, and retail banking. UBS is known for its expertise in managing large amounts of funds, and it has a reputation for providing innovative solutions to complex financial problems, with almost ten thousand financial advisors.
Since the collapse of two US banks in the last month, investors have become more aware of investing in the banks, as they still remember the GFC of 2007 that caused the average stock to almost halve and with the collapse of Archegos, investors realised how unstable Credit Suisse is at the moment. The reason for the Swisse government allowing this acquisition is that over the past two years Credit Suisse has recorded a net profit of negative $1,805 million USD and negative $7,642 million USD respectively. This means that over the last two years it has lost close to 9.5 billion dollars. With two consecutive years of negative profit, and the shareholders losing faith, their share price has dropped by 92% since the start of 2019. This lack of faith, however, is not unfounded as the company has been investing in other businesses that have all collapsed, when Bill Hwang’s Archegos Capital Management went under in 2021, Credit Suisse reported a 5 billion dollar loss. Credit Suisse has also had a long series of scandals, for example in October 2021 they had to pay a large fine over corrupt deals in Mozambique.
As a result of the Credit Suisse collapsing, the Swisse government has been forced to broker the takeover and offer the company to their main competitor, UBS. As Credit Suisse is one of the top 30 banks in the world and its collapse would have a resounding effect on the global economy. UBS has taken this with open arms and is now planning to purchase the company for 3.2 billion dollars as well as assuming Credit Suisse’s 5 billion Swiss franc. This acquisition will mean that they are now in the top 20 largest banks in the world and will become more influential around the world. This combined company will join the resources of both banks, however will have increased their stability and will hopefully last for many years into the future.