UBS in talks to buy troubled Credit Suisse

UBS reportedly looking at fully acquiring the embattled lender, which would create one of the world's biggest banks

A full merger between UBS, with $1.1 trillion of assets, and Credit Suisse, with $575 billion, would create one of the biggest financial institutions in Europe and globally. AFP

Switzerland's UBS and US investment major BlackRock are reportedly in separate talks to acquire embattled lender Credit Suisse.

The boards of UBS, one of the biggest private banks globally, and Credit Suisse are set to meet at the weekend and would discuss if a UBS takeover would involve all or part of the financially troubled lender, the Financial Times said.

Leading the discussions between Switzerland's two biggest banks are the Swiss National Bank and the country's regulator Finma, the sources said. A merger was dubbed as "plan A", Swiss regulators told their counterparts in the UK and the US, one of the persons said.

A full merger between the two banks would create one of the biggest financial institutions in Europe and globally. UBS has around $1.1 trillion of assets, while Credit Suisse has about $575 billion.

Both sides are also evaluating regulatory constraints in different jurisdictions, with UBS studying any potential risks that might result from a merger, the FT said, citing one of the persons.

Credit Suisse, UBS, the SNB, the Bank of England and the Federal Reserve did not respond to requests for comment, it said.

Later on Saturday as talks between UBS and Credit Suisse were in an advanced stage, the FT reported that BlackRock is assembling its own bid in an attempt to usurp UBS's bid, which is reported to be favoured by Swiss authorities.

However, shortly after the FT's news, BlackRock denied the report, saying it was not working on a bid for the Swiss lender.

"BlackRock is not participating in any plans to acquire all or any part of Credit Suisse, and has no interest in doing so," a spokesperson told news outlets, including Reuters and Bloomberg.

New York-based BlackRock, which manages about $8.6 trillion worth of assets, was said to be evaluating its options, which would have involved buying portions of Credit Suisse's business, the FT said, citing people briefed on the discussions.

BlackRock's attempt would also be more challenging as it would face significant regulatory hurdles in Europe and the US, the report said.

Credit Suisse, which is considered one of the global systemically important banks, is the latest major lender to be hit by a liquidity crisis.

Over the past week, bank runs have hit US lenders Silvergate Capital, Signature Bank and, most notably, Silicon Valley Bank (SVB), all collapsed, having been largely involved in the technology, start-up and cryptocurrency sectors.

These lenders have been seized by US authorities and placed under receivership. SVB and Signature Bank became the second and third-biggest banking failures in the US, trailing only Washington Mutual, which folded in 2008.

A fourth US lender, First Republic Bank, is currently teetering after it experienced a volatile week in trading, seeing wild swings in its stock price after the collapses of SVB, Signature and Silvergate.

Eleven major US banks, however, came to its rescue, announcing $30 billion in deposits to help shore up the troubled financial institution. Those banks included JP Morgan, Bank of America, Citigroup and Wells Fargo, which each contributed $5 billion of uninsured deposits.

Then, Credit Suisse this week threw more fuel to the fire after its top shareholder said it would not be adding further investment.

Shares of the Zurich-based institution dove on the news, but rebounded on Thursday after the Swiss central bank announced it was throwing a $54 billion lifeline to the lender — the first such move from a central bank since the 2008 crisis.

Such a merger between UBS and Credit Suisse could be challenging. One option under consideration was breaking up Credit Suisse and raising funds through a public offering of its Swiss unit, and its wealth and asset management divisions sold off to UBS or others, the FT had previously reported.