UBS to acquire Credit Suisse for nearly 3.25 billion dollars

LONDON, March 20, (AP): Credit Suisse shares plunged Monday after Swiss authorities cut a deal with its bigger rival UBS to acquire the troubled bank at a marked-down price. But European bank stocks and the wider market gained as investors watch whether moves to shore up banks will stem further upheaval in the global banking system.

Shares of Credit Suisse, whose woes stem from questions over its internal controls, fell 60% a day after UBS said it would buy the fellow Swiss bank for a lowball price of 3 billion Swiss francs ($3.25 billion). The shares are now trading at about the level that they are valued at by the deal.

Swiss regulators orchestrated the purchase in a bid to stop more turmoil after the collapse of two U.S. banks. In an indication of the frantic, behind-thescenes deal-making by Swiss authorities to resolve the issue before markets opened, the acquisition was announced late Sunday.

There is still uncertainty over how the deal will play out for the combined bank. Analysts say some previous forced bank mergers didn’t work out well for shareholders in the long run.

“Only time will tell how this shotgun wedding is received,” said Neil Shearing, group chief economist for Capital Economics.

UBS shares initially fell on the Swiss stock exchange but had gained more than 6% in afternoon trading. The deal added volatility to other European bank stocks, which fell in early trading even as benchmark indexes climbed, before some clawed back their losses. Germany’s Deutsche Bank, France’s BNP Paribas and Italy’s UniCredit were up, while London-based Barclays sank 3%.

Swiss authorities urged UBS to take over its smaller rival after a central bank plan for Credit Suisse to borrow up to 50 billion francs ($54 billion) last week failed to reassure investors and customers. Shares of Credit Suisse and other banks had tumbled last week after the failure of two banks in the U.S. raised questions about other potentially weak global financial institutions.

Many of Credit Suisse’s problems were unique and unlike the weaknesses that brought down Silicon Valley Bank and Signature Bank in the U.S. It has faced an array of troubles in recent years, including bad bets on hedge funds, repeated shake-ups of its top management and a spying scandal involving UBS.

Analysts and financial leaders say safeguards are stronger since the 2008 global financial crisis and that banks worldwide have plenty of available cash and support from central banks. But concerns about risks to the deal,

losses for some investors and Credit Suisse’s falling market value could renew fears about the health of banks.

Tobias Straumann, an economic history professor at University of

Zurich, said the merger was the right move because the U.S. bank collapses and the danger to Credit Suisse was “an international banking crisis in the making.”