UBS Group AG is in talks to take over parts or all of Credit Suisse Group AG, which may involve a government backstop, part of an urgent effort by Swiss and global authorities to restore trust in the banking system, people familiar with the situation said.
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Credit Suisse took a more-than-$50 billion Swiss National Bank liquidity lifeline this week after concerns deepened about its prospects. The action didn’t do enough to stop the slide in Credit Suisse’s shares or stem the loss of bank deposits, compelling the central bank and Switzerland’s top financial regulator to orchestrate talks with Credit Suisse’s larger rival, UBS.
The banks have discussed a number of scenarios, including those that end with UBS taking over all or parts of Credit Suisse, according to the people familiar with the situation.
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UBS has long been seen as part of any state-backed solution for Credit Suisse, which has a balance sheet roughly half the size of UBS’s $1.1 trillion in total assets. Any full-scale takeover would give UBS prized businesses within Credit Suisse, such as wealth clients in Asia and the Middle East, but might come with less desirable units such as Credit Suisse’s troubled investment bank. It also could derail UBS’s existing strategy and perceived stability with investors.
UBS has a market capitalization of roughly $65 billion, versus Credit Suisse’s $8 billion, according to FactSet.
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Both banks are deemed systemically important in Switzerland and globally, and a combination could be subject to additional oversight and capital charges.
Swiss authorities are expected to reach at least a rough deal before Monday’s market open. A spokesman for financial regulator Finma and the SNB declined to comment. A finance ministry spokeswoman said it doesn’t comment on rumors.
The talks, which were reported earlier by the Financial Times, may not result in a transaction between Credit Suisse and UBS. They are the top two banks by assets in Switzerland, serving savers and businesses there, and rich customers across the globe. Both have Wall Street investment banks and large asset management arms.
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UBS may not be the only player in the mix. Other financial institutions are examining the situation to see if they could buy parts of Credit Suisse or back bids, people familiar with those efforts said.
Large asset managers have long coveted some of the bank’s investing businesses, including its European real estate and U.S. asset-management arms. Credit Suisse’s executives have repeatedly rebuffed those offers, arguing that asset management was a core part of its operations.
Credit Suisse’s slide toward state assistance came after other banks and large investors pulled back last week from doing business with the Swiss lender. Other investment firms stopped trading with the bank in the fall, as its yearslong problems got worse, people familiar with the matter said.
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Analysts have been concerned about rich customers pulling their money. Executives at other banks said they got inflows from Credit Suisse clients last week.
Using UBS to save Credit Suisse marks a turnaround from nearly 15 years ago, when Switzerland bailed out UBS after it got stuck with billions of toxic assets in its U.S. business. Credit Suisse declined state aid at the time and emerged from the crisis in stronger shape.
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It went on to be battered by stricter financial regulation and costly settlements with regulators. The bank underwent a series of restructurings. Credit Suisse’s latest management team, some who worked previously at UBS, had appealed for more time to prove they could turn things around.
—Patricia Kowsmann contributed to this article.
Write to Justin Baer at [email protected], Margot Patrick at [email protected] and Ben Dummett at [email protected]