Credit Suisse is facing a fateful weekend. Will UBS come in with a rescue offer?
London(CNN) The fate of Credit Suisse could decide for Switzerland’s second largest bank in the next 36 hours after a hot week.
Investors and clients have been pulling their money out of Credit Suisse in recent days as turmoil gripped the global banking industry following the collapse of two US lenders. Shares of the bank fell 25% over the week despite a $54 billion emergency loan from the Swiss National Bank. The price of financial contracts designed to protect investors from possible losses on its bonds rose to record levels.
More than $450 million was withdrawn from European and US funds managed by the bank between Monday and Wednesday, according to Morningstar.
The Swiss central bank’s lifeline announced late Wednesday night after the stock plummeted to a new record low CreditSuisse (CS) sometime. But on Friday, analysts speculated a full bailout would be needed, and reports of a possible takeover by its biggest Swiss rival swirled. UBS (UBS).
Reuters and the Financial Times, citing people familiar with the matter, reported that Swiss regulators were urging banks to reach an agreement before markets open on Monday in a bid to boost confidence in the country’s banking system. The FT said the boards of UBS and Credit Suisse are expected to meet separately over the weekend.
Credit Suisse and UBS declined to comment to Reuters.
BlackRock (BLACK)Which owns 4% of Credit Suisse, a separate report in the Financial Times denied that it was preparing an alternative offer for all or part of the ailing bank.
“BlackRock is not involved in and has no interest in any plans to acquire all or any portion of Credit Suisse,” a BlackRock spokesperson told CNN.
Credit Suisse, which ranks among the top 30 banks in the global financial system, has been on the ropes for years after a series of scandals, huge losses and strategic missteps. The stock is down 75% over the past 12 months. But the crisis of confidence escalated rapidly this month.
Last week’s failure of Silicon Valley Bank, the largest by a US lender since the 2008 global financial crisis, caused investors to flee other perceived weak players.
Then Credit Suisse dropped another bombshell. In publishing its annual report on Tuesday, the 167-year-old bank acknowledged “material weaknesses” in its financial reporting, adding it had failed to adequately identify potential risks to its financial statements.
The following day, its largest shareholder – the Saudi National Bank – made it clear it would stop pumping money into the bank after spending $1.5 billion on a nearly 10% stake last year. That deterred investors.
In a note on Thursday, banking analysts at JPMorgan wrote that a takeover by UBS was the most likely endgame.
UBS would likely spin off Credit Suisse’s Swiss operations, as the combined market share would account for about 30% of Switzerland’s domestic banking market and would mean “too much concentration risk and market share control,” they added.
In an article on Saturday, the Neue Zürcher Zeitung – a newspaper in Zurich, home of both banks – said “the future of Credit Suisse will be decided this weekend.” The Swiss government is expected to issue a statement on Sunday evening, she added.
— Anna Cooban and Rob North contributed to this article.
