(Bloomberg) — UBS Group AG is emerging as a rare winner of the Credit Suisse Group AG crisis following a historic government-brokered deal that contains a host of financial shock relief measures. .
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After a weekend of frantic negotiations to come up with a solution before markets open in Asia, the company has reached an agreement to acquire its smaller rival for about $3.3 billion in a deal. The share agreement includes extensive liquidity and security provisions. Here are some of the big winners and losers that emerged from this deal.
Winner: Ralph Hamers
UBS executives will see the bank’s wealth and wealth management investments soar to around $5 trillion and get a special waiver to retain the profitable Swiss unit of Credit Suisse which many analysts say is worth more than three times what UBS paid for the entire company.
Ralph Hamers, former chief executive officer of ING Groep NV, and his team will have a lot of work to do as they weigh which businesses and people to keep, change or eliminate. But he will have 56 billion francs of so-called goodwill to help cover any write-offs, as well as 9 billion francs in guarantees from the Swiss government to cover certain losses. And the company has access to a huge influx of liquidity from the central bank.
While UBS will pause its share buybacks for now, it said it remains committed to a progressive dividend.
(Multiple) Losers:
Credit Suisse’s top shareholder
Gulf investors old and new are hurting. The investment by the National Bank of Saudi Arabia is startling in a short time: the bank has lost 1.1 billion francs less than 15 weeks since it completed its share purchase in the new capital raise. Credit Suisse’s best. The company thought it had bought a bargain when it became the largest shareholder of the Swiss bank just a few months ago. The president of the National Bank of Saudi Arabia sparked panic this week when he ruled out increasing the bank’s stake in Credit Suisse.
The Qatar Investment Authority’s pain has dragged on for a much longer time, when they first invested in the last financial crisis, but it is likely that they have lost an even larger amount. . In addition to being the bank’s second-largest owner, the bank previously owned the company’s AT1 bonds that were zeroed in the deal, though it’s unclear if QIA still holds that debt. . Shareholders won’t even be able to vote on the deal after Switzerland changed its rules to promote the merger.
Ulrich Koerner
Credit Suisse’s chief executive is expected to leave, having inherited a bankrupt lender he has been unable to revive. Ulrich Koerner, who took over the top job last summer, has outlined a plan to cut risk after a series of scandals and losses to focus more on wealth management. Bolder remains a scheme to disrupt the bank’s best performing investment banking business. But the company was unable to recover from the crisis of confidence that caused billions of dollars to be withdrawn in October. In recent days, pressure increased until the Swiss government was forced to intervene.
Michael Klein
The grand plan of the former investment banker of Citigroup Inc. aimed at revitalizing the First Boston brand and building it into a consulting powerhouse on Wall Street that has now gone up in smoke. Michael Klein, who has been selected to lead the CSFB sub-branch, was in the process of selling his consulting shop to Credit Suisse for about $210 million when the bank’s fortunes suddenly dwindled in the weeks recently. Although UBS President Colm Kelleher did not directly mention CSFB at a press conference late Sunday, he did indicate that the company is happy with its own investment bank and plans to cut back. significantly as well as reducing the risk for Credit Suisse.
Bondholders AT1
Bond investors are often better protected from losses than shareholders, but not in this case. The Swiss regulator will impose a loss on $17 billion worth of high-risk debt known as additional tier 1 bonds, which form part of a debt and equity buffer intended to prevent people Taxpayers must bear the bill for the bank’s collapse. The total write-down marks the largest loss for Europe’s $275 billion AT1 market. Shareholders, who are often the first to be affected in a bearish scenario, have received at least a small consideration.
Swiss Regulatory Authority
Finma becomes the first regulator to track a bank deemed systemically important to be bailed out since the financial crisis. The Swiss government had to provide billions of francs in guarantees to UBS and the central bank was forced to provide extensive liquidity support to facilitate the rescue, putting taxpayers at risk 15 years after they bailed out UBS. Swiss Finance Minister Karin Keller-Sutter admits this is the only way to stabilize international financial markets.
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