Switzerland's largest banking entity, UBS Group AG, has made an offer to buy the crisis-hit Credit Suisse, which is also the country's second-largest private lender, for up to $1 billion, a report in the Financial Times said on March 19.
The proposed all-share deal is expected to be finalised and signed by this evening, the newspaper said, adding that the deal will be priced at a fraction of Credit Suisse's closing price on March 17.
An offer was made in the morning on March 19 with a price of 0.25 Swiss francs ($0.27) a share to be paid in UBS stock, the report said, citing people familiar with the matter. Credit Suisse's shares closed at 1.86 Swiss francs in the last trading session.
UBS has also insisted on a "material adverse change" that voids the deal in the event its credit default spreads jump by 100 basis points or more, the report added.
Credit Suisse, UBS Group and the Swiss government did not immediately respond to the report.
UBS is examining a takeover of Credit Suisse that could see the Swiss government offer a guarantee of $6 billion against the risks involved, two people with knowledge of the matter told news agency Reuters on March 18.
The government guarantees UBS is seeking would cover the cost of winding down parts of Credit Suisse and potential litigation charges, the sources reportedly said.
The frenzied weekend negotiations come after a brutal week for banking stocks and efforts in Europe and the U.S. to shore up the sector. U.S. President Joe Biden's administration moved to backstop consumer deposits while the Swiss central bank lent billions to Credit Suisse to stabilize its shaky balance sheet.
The 167-year-old Credit Suisse is the biggest name ensnared in the turmoil unleashed by the collapse of US lenders Silicon Valley Bank and Signature Bank over the past week, spurring a rout in banking stocks and prompting authorities to rush out extraordinary measures to keep banks afloat.
Credit Suisse shares lost a quarter of their value in the last week. It was forced to tap $54 billion in central bank funding as it tries to recover from a string of scandals that have undermined the confidence of investors and clients.
The company ranks among the world's largest wealth managers and is considered one of 30 global systemically important banks whose failure would ripple throughout the entire financial system.
The banking sector's fundamentals are stronger and the global systemic linkages are weaker than during the 2008 global financial crisis, Goldman analyst Lotfi Karoui wrote in a late March 17 note to clients. That limits the risk of a "potential vicious circle of counterparty credit losses," Karoui said.
"However, a more forceful policy response is likely needed to bring some stability," Karoui said. The bank said the lack of clarity on Credit Suisse's future will pressure the broader European banking sector.
A senior official at China's central bank said on Saturday that high interest rates in the major developed economies could continue to cause problems for the financial system.
There were multiple reports of interest for Credit Suisse from other rivals. Bloomberg reported that Deutsche Bank was looking at the possibility of buying some of its assets, while U.S. financial giant BlackRock denied a report that it was participating in a rival bid for the bank.
With Reuters inputs
