One big winner and many losers in the Credit Suisse rescue of UBS

After a weekend of frantic negotiations to find a solution before markets opened in Asia, the firm deal to buy its smaller rival for about $3.3 billion in a one-share deal that included extensive guarantees and liquidity provisions. Here are some of the big winners and losers emerging from the deal.

Read also: UBS vows to shrink ‘difficult’ Credit Suisse investment bank

Winner: Ralf Hammer

UBS’s chief executive will boost the bank’s assets invested in assets and asset management to nearly $5 trillion and receive special dispensation to maintain Credit Suisse’s profitable Swiss unit, which many analysts say has been cornered by UBS. was worth more than triple what the entire firm had paid for it.

Ralf Hamers, former ING Groupe NV executive, and his team will have a lot to work with as they consider which businesses and people to keep, replace or remove. But it will have 56 billion francs of so-called malpractice to help cover any write-downs, as well as a guarantee of 9 billion francs from the Swiss government to cover some of the losses. And the firm can access a large liquidity line from the central bank.

While UBS will suspend its share buybacks for now, it said it is still committed to a progressive dividend.

(Many) Losers:

Credit Suisse’s top shareholders

Gulf investors old and new are making losses. The Saudi National Bank’s investment was surprising in its brevity: the lender lost 1.1 billion francs less than 15 weeks after buying its stake in Credit Suisse’s latest capital raise. When it became the Swiss bank’s largest shareholder just a few months back, the firm thought it was buying a bargain. The president of the Saudi National Bank helped fuel the panic this week when he refused to increase his stake in Credit Suisse.

Read also: Credit Suisse’s 9,000 job cuts foreshadow UBS takeover

The Qatar Investment Authority’s pain came over a very long period, as it first invested in the last financial crisis, but lost even more. In addition to being the bank’s second-largest holder, it had in the past held the firm’s AT1 bonds that were written down to zero in the deal, though it is unclear whether QIA still held that debt. Shareholders also won’t get to vote on the deal after Switzerland changed its rules to allow mergers through mergers.

ulrich körner

Credit Suisse’s chief executive is expected to leave, having inherited a broken lender that he was unable to revive. Ulrich Koerner, who took over the top job only last summer, had already drawn up plans to reduce risk following a spate of scandals and losses to focus more on wealth management. Boulder was still the plan to break up the bank’s best performing investment banking businesses. But the firm was unable to recover from a crisis of confidence that saw billions of dollars exited in October. In recent days, the pressure intensified until the Swiss government was forced to step in.

Michael Klein

Citigroup Inc. The former U.S. investment bank chief’s grand plan to revive the First Boston brand and build it into a Wall Street advisory powerhouse now lay in ashes. Michael Klein, who was tapped to lead the CSFB spin-off, was already in the process of selling his advisory boutique to Credit Suisse for a consideration of around $210 million when the bank’s fortunes suddenly unraveled in recent weeks. . While UBS Chairman Colm Kelleher did not directly address the CSFB at a press conference late Sunday, he indicated the firm was happy with its own investment bank and plans to hedge risk with Credit Suisse as well. .

AT1 bondholders

Bond investors are generally better protected from losses than shareholders, but not in this case. The Swiss regulator will put on $17 billion of high-risk loans known as additional Tier 1 bonds, which form part of a buffer of debt and equity aimed at preventing taxpayers from shouldering the bill for the bank’s collapse. The total writedown marked the biggest ever loss for Europe’s $275 billion AT1 market. Shareholders, who are usually the first to take a hit in a writedown scenario, got at least a small idea.

swiss regulator

FINMA became the first regulator to rescue a bank considered systemically important following the financial crisis. The Swiss government had to step in to provide guarantees of billions of francs to UBS and the central bank was forced to provide an extensive liquidity backstop to facilitate the rescue, putting taxpayers at risk 15 years after bailing out UBS. given. Swiss Finance Minister Karin Keller-Sutter acknowledged that this was the only way to stabilize international financial markets.

The text of this story is published from a wire agency feed without any modification.