The marriage between the two largest banks in Switzerland, UBS and Credit Suisse, was consummated this Monday, less than three months after the Swiss government promoted the operation.
UBS confirmed on Monday the acquisition of Credit Suisse, less than three months after announcing this operation to avoid the imminent bankruptcy of what was the second largest bank in Switzerland, dragged by a panic movement among investors.
The Swiss government urged UBS to buy Credit Suisse, considered a systemic risk bank for the national economy, and for this offered a guarantee of about 9,000 million euros, while the Swiss National Bank put on the table more than 200,000 million euros in loans of various kinds.
The new entity will have a market value of 1.54 trillion euros, the size of Spain’s GDP or almost double the Swiss GDP.
Investors reacted positively to the news this morning, which was reflected in the appreciation of around 1.1% of UBS shares, while the Zurich Stock Exchange index on which it is listed rose only 0.47 %.
Simultaneously, Credit Suisse shares rose 1% and traded at 0.82 Swiss franc cents (0.84 euros).
A year ago the bank’s shares were trading at 6.3 Swiss francs, three years ago at 9.7 francs and five years ago at 15.7 francs, despite the fact that even then its image suffered considerable deterioration due to its mismanagement and the scandals in which it was involved.
Today’s trading day is the last on the Zurich Stock Exchange for Credit Suisse, which will also be released from the New York stock market, where it was listed through the so-called American Depositary Shares.
UBS and the Swiss Government signed a state guarantee contract three days ago for a value of 9,000 million francs (9,200 million euros) against the eventual losses that this transaction could cause, although this aid will only become effective once the government itself purchasing bank has suffered a loss of up to 5 billion francs.
The guarantee applies to a specific Credit Suisse portfolio which would represent 3% of UBS’s total assets at the end of the acquisition and which consists of derivative products, structured products, credits and non-strategic instruments, which were not part of the core business of Credit Suisse.
According to Swiss analysts, this portfolio would be valued at around 50,000 million euros and the losses it could generate could be around 10% of that amount, which would be what UBS itself has promised to absorb.
