UBS reportedly offered to buy Credit Suisse for $1 billion

Swiss banking giant UBS on Sunday offered to buy embattled rival Credit Suisse for up to $1 billion, according to the Financial Times, citing four people with direct knowledge of the situation.

The deal, which the FT said could be signed as early as Sunday evening, values ​​Credit Suisse at around $7 billion below its market value at Friday’s close.

The FT said UBS had offered a price of 0.25 Swiss francs ($0.27) per share to be paid in UBS shares. Credit Suisse shares closed on Friday at 1.86 Swiss francs. The fast-paced nature of the negotiations means that the terms of any final agreement could be different from those reported.

Credit Suisse reportedly backed down from the offer, arguing that it is too low and would hurt shareholders and employees, people familiar with the matter told Bloomberg.

Credit Suisse and UBS declined to comment on the information when contacted by CNBC.

Swiss authorities are also reportedly considering a full or partial nationalization of the bank as an alternative to taking control of UBS, according to an article published Sunday by Bloomberg.

The UBS deal is being orchestrated quickly, so the Swiss are preparing in case it fails, Bloomberg said, citing people with knowledge of the matter. The country would debate whether it would take over the bank completely or hold a large equity stake.

UBS’s offer comes after Credit Suisse shares posted their worst weekly decline since the start of the coronavirus pandemic, despite announcing that it would have access to a loan of up to 50 billion Swiss francs (54 billion dollars) from the Swiss central bank.

It had already battled a string of losses and scandals, and last week sentiment was rattled again with the collapse of Silicon Valley Bank and the closure of Signature Bank in the US, sending stocks tumbling.

Credit Suisse’s size and potential impact on the global economy is far greater than that of US banks. The Swiss bank’s balance sheet is about twice as large as that of Lehman Brothers when it failed, at around 530 billion Swiss francs at the end of 2022. It is also much more globally interconnected, with multiple international subsidiaries, which makes the orderly management of Credit Suisse’s situation even more important.

Credit Suisse lost around 38% of its deposits in the fourth quarter of 2022 and revealed in its delayed annual report early last week that the outflows had not yet been reversed. It announced a net loss of 7.3 billion Swiss francs for 2022 and expects another “substantial” loss in 2023.

The bank previously announced a massive strategic overhaul in a bid to address these chronic issues, with current CEO and Credit Suisse veteran Ulrich Koerner taking over in July.