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UBS, the biggest bank in Switzerland and one of the largest managers of real estate in the world, will purchase its rival, the floundering Credit Suisse, in a $3.2 billion deal struck by Swiss regulators over the weekend, according to reports.
Bloomberg and the Financial Times reported Sunday that UBS had agreed to the deal, which was intended to help contain the crisis of confidence spreading across the international financial market.
As part of the deal, the Swiss National Bank will provide a liquidity line of 100 billion Swiss francs, the Financial Times reported. The plan seeks to address a mass of client outflows from Credit Suisse and a massive rout in the bank’s stocks and bonds over the last week in response to the collapse of smaller lenders in the United States — Silicon Valley Bank and Signature Bank.
The deal is one of the most significant events in banking in years and marks the first merger between two major international banks since the 2008 financial crisis.
“It was indispensable that we acted quickly and find a solution as quickly as possible“ due to Credit Suisse’s status as a systemically important bank, Swiss National Bank President Thomas Jordan said at a press conference late Sunday.
An uncontrolled collapse of Credit Suisse would have had “incalculable consequences for the country and the international financial system,” Swiss President Alain Berset said on Sunday.
The Federal Reserve and the United States Treasury Department welcomed the deal, as did the European Central Bank.
“We welcome the announcements by the Swiss authorities today to support financial stability. The capital and liquidity positions of the U.S. banking system are strong, and the U.S. financial system is resilient,” Federal Reserve Board Chair Jerome Powell and Secretary of the Treasury Janet Yellen said in a joint statement. “We have been in close contact with our international counterparts to support their implementation.”
The purchase price of $3.2 billion for Credit Suisse represents a steep discount for the bank, which was valued at $8.5 billion at market close on Friday and had $574 billion in total assets at the end of 2022. Bloomberg reported that insiders at the bank felt the price was too low and would be damaging to stockholders.
Indeed, shares for Credit Suisse plunged once markets opened on Monday, with stocks trading at 93 cents a share as of Monday at noon eastern time, after trading at $2.15 a share Friday evening.
Shares of UBS initially fell after news of the merger was announced but gained more than 6 percent in afternoon trading. U.S. stocks also rallied Monday, with the S&P 500, Dow and Nasdaq all trading higher.
UBS Asset Management’s real estate division is one of the largest real estate asset managers in the world, according to its website. It actively manages $100 billion in real estate investments across the globe and has invested in real estate since 1943.