WHAT HAPPENED: UBS (Union Bank of Switzerland) has agreed to buy CS (Credit Suisse) for $3.2B. Shares of Credit Suisse are down sharply, while shares of UBS are rising in the premarket.
Crisis Averted?
Over the past year, Market Rebellion has been tracking a slew of bearish unusual options activity in Credit Suisse, and now, it appears Credit Suisse’s problems have come to roost. After concerns about credit default swaps, and a history of controversy that included relation to human traffickers, dictators, the yakuza and money launderers, the 166 year old bank is set to be acquired by UBS. The market is split in its reaction to the deal.
The announcement of the acquisition of Credit Suisse by UBS, facilitated by the Swiss government, has sparked mixed reactions within the financial community. While some experts see this deal as a positive step towards stability in global markets, others remain skeptical, highlighting lingering concerns about systemic risks.
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The new banking entity created by this merger will boast an impressive total of $5 trillion in invested assets, which could give UBS a competitive edge in the international banking arena. (BOFA)
The deal has led Credit Suisse to a giant drop in its share value.
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The same couldn’t be said for UBS, which was seen rising nearly one percent in the pre-market.
Furthermore, the terms of the deal, which include a liquidity line and a loss guarantee, have yet to be fully disclosed, raising doubts about the extent of the Swiss government’s support. Despite the potential benefits of this acquisition, analysts warn that a closer examination of the details is needed to assess its long-term impact on the financial sector.
UBS chairman Colm Kelleher said the acquisition was “attractive” for UBS shareholders, but added
“As far as Credit Suisse is concerned, this is an emergency rescue.”
Notably, this didn’t change Goldman Sachs’ call that pressure on the banks will lead the Fed to halt rate hikes at the upcoming meeting. The next FOMC is set to be held on Wednesday afternoon, March 22nd, at 2:00 PM EST, with comments from Fed Chair Jerome Powell soon after.
