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· Posted on
February 21, 2024

The Swiss government puts UBS and Credit Suisse in a $3.2 billion USD forced marriage to save the country

The Swiss government brokered a deal for UBS to take over Credit Suisse.

What's the key learning?

  • The Swiss government brokered a deal for UBS to take over Credit Suisse and this deal was done in the hope of reassuring investors about the health of the country's financial sector.
  • Your competitor’s problem could become your problem too - when your competitor fails dismally, it reduces the confidence in the whole industry.
  • While this may not be the most appealing acquisition for UBS today - it may present some significant opportunities once the dust settles.

👉 Background: As mentioned yesterday, Credit Suisse is the 166 year old Swiss bank that has been hit with scandal after scandal over the past few years. Corruption, lawsuits and billion-dollar losses due to risky lending.

👉 What happened: Last week, Credit Suisse suffered more than $10 billion in customer outflows each day. So over the weekend, the Swiss government brokered a deal for UBS to take over Credit Suisse for a measly $3.2 billion USD.

👉 What else: To put the price into perspective, in December 2017 (just over five years ago), Credit Suisse had a market value of ~$45 billion USD. So this deal was done in the hope of reassuring investors about the health of the country’s financial sector.

What's the key learning?

💡Your competitor’s problem could become your problem too. Considering the downfall of Credit Suisse, its falling valuation and declining customers, you’d think that this would be good for UBS?

💡But the truth is… when your competitor fails dismally, it reduces the confidence in the whole industry. And that’s exactly what UBS’ CEO said.

💡 And while this may not be the most appealing acquisition for UBS today - it may present some significant opportunities once the dust settles:

  • In normal times, this merger would likely be rejected because it would allow UBS to become a monopoly in Switzerland.
  • But now, UBS will reshape Credit Suisse, its culture, cut out the bad (investment bank) but keep the good (retail bank).

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