- Credit Suisse shaken by Archegos and Greensill scandals
- Overtaking management eyes, investment bank can shrink – sources
- Shake could lead to UBS merger – sources
ZURICH, June 25 (Reuters) – Credit Suisse’s top management is under pressure to present an audit plan for the Swiss bank hit by the scandal, which could include a possible merger with rival UBS (UBSG.S), three people who are familiar with his way of thinking said Reuters.
Bank executives fear that the scandal-vulnerable Swiss flagship lender could be challenged by investors demanding its liquidation, or that its falling stock market value may make it a target for a hostile overseas takeover.
New chairman Antonio Horta-Osorio announced a strategic review in late April and told investors he would take the time to make the tough decisions ahead.
The bank’s senior management is due to meet next week, a source said, while another knowledgeable person said top executives wanted to consider restructuring proposals in early July.
The Swiss bank had to review its business after losing more than $ 5 billion when it was forced to close down the Archegos family office. It faces a flurry of legal action for helping clients invest $ 10 billion in bonds from the collapsed supply chain finance company Greensill Capital. Continue reading
The bank’s stocks are down more than a quarter since early March, when its problems with Greensill were exposed.
“Credit Suisse needs a merger deal immediately,” a person who knows the bank’s mindset told Reuters.
“In Zurich there is growing concern that activist investors will pursue them when they stand still.”
Some executives have discussed steps like spinning off their local Swiss bank to prepare the rest of the company for a merger, cutting back investment banking, or selling off the wealth management business, two of the people said.
A third said selling the US investment bank was also an option.
Management talks about restructuring are preliminary and while they are in full swing no decisions have been made, people said.
Credit Suisse and UBS declined to comment.
The bank’s management needs a new Credit Suisse as its reputation with clients and in Switzerland is rocketing.
In April, the Swiss supervisory authority FINMA announced that it had initiated enforcement proceedings against Credit Suisse following Archegos and that it would investigate deficiencies in risk management.
The Swiss regulators are angry with what they consider to be the permissive culture of the bank, said a person with direct knowledge of the matter. Continue reading
Credit Suisse’s shrinking market valuation makes it a fraction of some of the major Wall Street banks that have also been touted as potential applicants.
But a US takeover would not go down well in Switzerland. Relations between Swiss banks and Washington were damaged when the United States pressured them to give up its strict confidentiality obligations more than a decade ago.
“DISAPPEARING IN FOREIGN HANDS”
A merger with UBS would be tastier, people said.
“The Swiss establishment is aware that without a domestic merger, Credit Suisse will disappear into foreign hands,” said one of the sources.
However, the merger of Credit Suisse and UBS would have a dominant position in the Swiss market, which could worry regulators, who could also ask for a capital increase from a merged group.
Credit Suisse could split its Swiss bank to address competition concerns, a source said.
Credit Suisse-UBS would have over 110,000 employees and a market value of over 85 billion US dollars.
When asked about working with Credit Suisse earlier this year, Ralph Hamers, CEO of UBS, dismissed the idea and said he preferred “organic” growth.
Any M&A deal for Credit Suisse would mean the end of a national icon that was founded to finance the country’s alpine railways and is central to Switzerland’s transformation from an agricultural nation to a financial power.
In early Friday trading, Credit Suisse stock rose 2.8% while UBS stock fell 0.2%. Credit Suisse was also buoyed after the Federal Reserve’s stress tests showed that its US army’s capitalization could withstand a severe economic downturn.
For such a flagship, the Swiss might prefer a domestic solution to a takeover by a foreign bank.
A cross-border merger would be complicated because it would be unclear whether Switzerland or another host country would have control.
UBS, for example, had merger talks with Deutsche Bank (DBKGn.DE) in 2019, but these fell apart in the face of Swiss resistance, said another person familiar with the matter. The two banks declined to comment.
German boss Christian Sewing has expressed interest in participating in European bank mergers. Continue reading
However, many people who spoke to Reuters for the story thought a deal between Deutsche Bank and Credit Suisse was unlikely.
Reporting by Pamela Barbaglia in London, John O’Donnell in Frankfurt, Brenna Hughes Neghaiwi in Zurich; additional reporting by Oliver Hirt in Zurich, Patricia Uhlig and Tom Sims in Frankfurt, Lauren LaCapra in New York; Letter from John O’Donnell; Editing by Rachel Armstrong and Jane Merriman
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