UBS’ Credit Suisse takeover, ‘deal of the century’?

ZURICH: Did banking giant UBS make the deal of the century when it bought one of the world’s biggest banks for a pittance as it teetered on the edge of the abyss?

Switzerland’s largest bank was in March strong-armed by Swiss authorities into a US$3.25 billion takeover of Credit Suisse, to keep its closest domestic rival from going under.

At the time, investors gasped at the risks UBS was taking on with the purchase.

But by August, the bank said it would not need the billions in support offered by the Swiss government and central bank to offset any surprises that might pop up in its stricken rival’s accounts.

That must mean that Credit Suisse’s situation was “much better than described in March”, Thomas Aeschi, a member of parliament with the populist rightwing Swiss People’s Party (SVP), wrote on X, formerly Twitter.

UBS seemed to prove him right when it unveiled its second-quarter results on Aug 31.

The bank posted a towering net profit of US$29.2 billion for the three-month period, thanks to an exceptional gain due to the gulf between the amount paid for Credit Suisse and its book value.

“UBS has pulled off the deal of the century,” Switzerland’s Socialist Party said, maintaining the “rescue” was more of a “godsend”, allowing it to snatch up a bank at a dramatically reduced rate.

“If we had chosen another path, (like) a temporary or partial nationalisation”, said Samuel Bendahan, a Socialist MP and economics professor at the University of Lausanne, the Swiss state “would have taken on the risk, but those US$29 billion would have gone to the population”.

Instead, the takeover has created “a monopolistic situation”, he told AFP, warning that while this might strengthen UBS, it puts Switzerland in an extremely risky position if the new mega-bank were to one day face a crisis.

Politicians are not the only ones taking issue with the takeover.

Gisele Vlietstra, founder of the Swiss Investor Protection Association, told public broadcaster RTS that UBS’ towering quarterly profit confirms that the “intrinsic value” of Credit Suisse was “far higher” than the purchase price.


Z24 News

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