UBS shares sink after Credit Suisse buyout

A sign and logo of Credit Suisse bank is seen beneath a sign of Swiss giant banking UBS in Zurich on March 20, 2023. – Shares in European banks sank on March 20, 2022 despite a buyout of Credit Suisse by Swiss lender UBS aimed at preventing a global banking crisis. (Photo by Fabrice COFFRINI / AFP)

Zurich, Switzerland | AFP | Monday 3/20/2023

UBS share price plunged on Monday as a deal to take over its troubled Swiss rival Credit Suisse for $3.25 billion failed to calm stock market nerves.

The buyout, in which Switzerland’s biggest bank will take over the second largest, was vital to prevent economic turmoil from spreading throughout the country and beyond, the Swiss government said Sunday.

But investors remained on edge, with UBS shares falling as much as 12 percent on Monday morning before clawing back some losses.

Shares of Credit Suisse, for their part, opened almost 64 percent lower, at just 0.68 Swiss francs per share, well below the UBS takeover price in a deal aimed at preventing a wider international banking crisis.

After suffering heavy falls on the stock market last week, Credit Suisse’s share price closed Friday at 1.86 Swiss francs, with the bank worth just over $8.7 billion.

UBS said Credit Suisse shareholders would get 0.76 Swiss francs per share.

Credit Suisse’s share price has tumbled from 12.78 Swiss francs in February 2021 due to a string of scandals and crises that it has been unable to shake off.

Like UBS, Credit Suisse was one of 30 worldwide Global Systemically Important Banks — deemed of such importance to the international banking system that they are colloquially called “too big to fail”.

But the markets saw the bank as a weak link in the chain.

Amid fears of contagion after the collapse of two US banks, Credit Suisse’s share price plunged by more than 30 percent last Wednesday to a record low of 1.55 Swiss francs, prompting the central bank to step in and offer a $54-billion lifeline.

But after recovering some ground Thursday, it saw its shares plunge again, prompting a weekend of frenzied negotiations before the Swiss government, central bank and regulator, along with the two banking giants announced the mega-takeover late Sunday.