The Swiss Investor Protection Association founder Vlietstra said that UBS’ towering quarterly profit confirms that the “intrinsic value” of Credit Suisse was “far higher” than the purchase price. — Reuters
ZURICH: Did banking giant UBS make “the deal of the century” when it bought one of the world’s biggest banks for a pittance as it teetered on the edge of the abyss?
Switzerland’s largest bank was in March strong-armed by Swiss authorities into a US$3.25bil takeover of Credit Suisse, to keep its closest domestic rival from going under.
At the time, investors gasped at the risks UBS was taking on with the purchase.
But by August, the bank said it would not need the billions in support offered by the Swiss government and central bank to offset any surprises that might pop up in its stricken rival’s accounts.
That must mean that Credit Suisse’s situation was “much better than described in March”, Thomas Aeschi, a member of parliament with the populist rightwing Swiss People’s Party (SVP), wrote on X, formerly Twitter.
UBS seemed to prove him right when it unveiled its second-quarter results on Aug 31. The bank posted a towering net profit of US$29.2bil for the three-month period, thanks to an exceptional gain due to the gulf between the amount paid for Credit Suisse and its book value.
“UBS has pulled off the deal of the century,” Switzerland’s Socialist Party said, maintaining the “rescue” was more of a “godsend”, allowing it to snatch up a bank at a dramatically reduced rate.
“If we had chosen another path, (like) a temporary or partial nationalisation,” said Samuel Bendahan, a Socialist MP and economics professor at the University of Lausanne, the Swiss state “would have taken on the risk, but those US$29bil would have gone to the population”.
Instead, the takeover has created “a monopolistic situation”, he told AFP, warning that while this might strengthen UBS, it puts Switzerland in an extremely risky position if the new mega-bank were to one day face a crisis.
Politicians are not the only ones taking issue with the takeover.
Gisele Vlietstra, founder of the Swiss Investor Protection Association, told public broadcaster RTS that UBS’ towering quarterly profit confirms that the “intrinsic value” of Credit Suisse was “far higher” than the purchase price.
She said she hoped that the lawsuits brought by her association and others on behalf of thousands of Credit Suisse shareholders will help determine “the correct value” that they should be compensated.
“UBS paid a nickel and dime” and “got rid of its main competitor” in one fell swoop, Carlo Lombardini, a lawyer and banking law professor at Lausanne University, said.
The coming restructuring will clearly carry risks, “but having paid just US$3bil, it can’t go wrong”, he said, slamming the option chosen by the Swiss authorities.
Like UBS, Credit Suisse was listed among 30 international banks deemed too big to fail because of their importance in the global banking architecture. But the collapse of three US regional lenders in March left the firm looking like the next weakest link in the chain.
The Swiss government feared Credit Suisse would have quickly defaulted and triggered a global crisis, shredding Switzerland’s reputation for sound banking.
But its chosen option for dealing with the issue was certainly a boon to UBS, which will now swell to manage US$5 trillion of invested assets.
UBS chief Sergio Ermotti acknowledged in a recent interview with the SonntagsZeitung weekly that the bank had been “worried” about its competitor since 2016, and had among other things looked into the possibilities of buying it, for fear a foreign lender might snap it up. — AFP
