The UBS-Credit Suisse deal, visually explained
UBS, Switzerland's largest bank, will buy its beleaguered rival Credit Suisse in the largest deal yet meant to soothe the nerves of global investors, already jittery since the failure of Silicon Valley Bank in February.
Here is a look at how important Credit Suisse is, how its fall was a long time in the making, and what the deal will look like.
Credit Suisse is the 45th largest bank in the world in terms of total assets, according to S&P Global, with about $1.1 trillion in assets. UBS had roughly $1.5 trillion in assets, as of 2021. Credit Suisse is among the banks deemed "systemically important" by the Financial Stability Board — which monitors the international banking system — given its connections to the global economy.
Credit Suisse is among only 30 banks to be given that distinction, along with JPMorgan Chase in the U.S., TD Bank in Canada, and a handful of banks in China.
How the Swiss banks compare to the 100 biggest in the world
The downfall of Credit Suisse comes after Silicon Valley bank's failure sent a chill across global banking, but the former's death knell has been a long time coming.
The bank was connected to two financial companies that collapsed within a matter of weeks in 2021. The failure of Greensill Capital and Archegos Capital Management dealt the bank a blow worth billions of dollars.
The long decline of Credit Suisse
Since then, it's been a tumultuous few years for the 187-year-old institution. For instance, last year, it was the focus of media reports that suggested the bank's clients included human rights abusers, fraudsters and those under sanctions.
Fast forward to this year. After the fall of Silicon Valley Bank, fear spread about the health of the world's financial institutions. Worried investors began pulling their funds from the Swiss lender and stock prices dropped dramatically. A bailout from the Swiss National Bank worth more than $68 billion US last week was not enough to calm investors.
UBS will buy Credit Suisse for 3 billion Swiss francs (about $4.4 billion Cdn), and UBS shareholders are going to take a massive hit. Shareholders will get a single share of UBS for every 22.48 shares of Credit Suisse.
"It's a historic day in Switzerland, and a day frankly, we hoped, would not come," UBS Chair Colm Kelleher told analysts on a conference call.
"I would like to make it clear that while we did not initiate discussions, we believe that this transaction is financially attractive for UBS shareholders."
The deal is expected to be closed at the end of 2023.
