UBS (SWX: UBSG) today (Monday) confirmed the compilation of its takeover of Credit Suisse, creating a mammoth Swiss bank with a balance sheet of $1.6 trillion and a workforce of 120,000.
A Historic Deal in Banking
"This is the start of a new chapter – for UBS, Switzerland as a financial centre and the global financial industry," The CEO of UBS, Sergio Ermotti and the Chairman, Colm Kelleher stated in an open letter published in Swiss newspapers. "We will bring together the collective expertise, scale, and wealth management leadership of both UBS and Credit Suisse to create an even stronger combined firm."
In addition, the letter mentioned that there will be "challenges" along with "great opportunity" as UBS will "never compromise on [its] strong culture, conservative risk approach or quality service." This generally takes aim at the scandal-ridden past of Credit Suisse.
A Financial Times report confirmed that UBS is going to impose tight restrictions on Credit Suisse bankers. The two dozen 'red lines' for Credit Suisse bankers include a ban on onboarding new clients from high-risk countries and complex financial products.
Conditions in the Deal
With the closure of the deal, Credit Suisse shares on the SIX Swiss Exchange and its American Depositary Shares on the New York Stock Exchange will be delisted. Credit Suisse shareholders will receive one UBS share for every 22.48 outstanding shares held.
UBS agreed to acquire its rival Credit Suisse for 3 billion Swiss francs on March 19 in a deal pushed by the Swiss government to avoid a banking crisis in the country. The deal was rushed through with an emergency government greenlight and no approval was sought from the shareholders of either bank.
Last Friday, Swiss regulators confirmed that they would cover losses of up to 9 billion Swiss francs after UBS incurs the first 5 billion Swiss francs as part of the transaction.
The extraordinary deal was sealed within three months, which was tight considering the size and complexities of the two involved entities. With the merger, the group will oversee $5 trillion in assets, making UBS the largest wealth manager and ending the 167 years of Credit Suisse's legacy.
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