Has UBS got a good deal with its takeover of Credit Suisse?

A Swiss bank teeters on the brink of catastrophe as ministers and central bankers scramble to arrange a rescue…

But this is not yesterday’s news, when UBS rescued Credit Suisse. This was 15 years ago. And it was UBS, not Credit Suisse, that needed bailing out as the financial crisis engulfed global lenders.

With the tables turned, and the rescued now the rescuer, what is effectively a ‘shotgun wedding’ has been forged to prevent a new wave of market turmoil.

The odd couple: UBS has its own chequered history. But in recent years its horror shows have been overshadowed by the spectacular self-immolation of Credit Suisse

Yet agreeing to be marched up the aisle by Swiss regulators may end up having a happy outcome for UBS. 

If there are no more skeletons lurking in Credit Suisse’s cupboard after the deal completes, the £2.6billion price tag could even look like a bargain.

UBS has its own chequered history.

But in recent years its horror shows have been overshadowed by the spectacular self-immolation of Credit Suisse, which was valued at more than £70billion at its pre-financial crisis peak.

Founded in 1856 to finance the expansion of the Swiss railways, it has careered off track in recent years with a series of scandals that seemed to have stoked its acceleration towards the cliff edge.

It built up a huge wealth management business and a UK-based investment banking subsidiary, Credit Suisse International. 

Both Swiss banks are among the 30 considered so big their failure might trigger a financial crisis – explaining why officials have been so desperate to contain the damage from the latest turmoil.

Credit Suisse proved more resilient than UBS when, in 2008, the global banking sector was brought to its knees.

Investor confidence was boosted by Qatar’s sovereign wealth fund buying a stake in Credit Suisse.

Tying the knot: UBS chief exec Ralph Hamers (left) and Credit Suisse boss Ulrich Koerner

Like many global banking giants, it came under the intense scrutiny of US regulators in the aftermath of the crisis, receiving fines totalling billions of dollars for tax evasion as well as money laundering.

In 2013, former Credit Suisse trader Kareem Serageldin became the only banker jailed over the US sub-prime mortgage scandal that precipitated the crash. 

Two years later, it poached Tidjane Thiam, boss of UK-listed insurance giant Prudential, to become its new boss. But his tenure would later end amid a power struggle and spying scandal.

Thiam quit in 2020 after it emerged that two senior executives had been placed under surveillance – one of whom had been on gardening leave before taking a top job at UBS.

Tragically, a private investigator involved in the episode took their own life. An investigation cleared Thiam of any wrongdoing but he was forced out by chairman Urs Rohner.

Another former City bigwig would prove even more short-lived. Ex-Lloyds boss Antonio Horta-Osorio stepped down as chairman in 2022 just nine months into the role after breaking Covid-19 rules to go to the Wimbledon tennis finals.

Short-lived: Tidjane Thiam and Antonio Horta-Osorio

Meanwhile, the bank was found to have got itself into more unwise schemes.

In 2021, it lost billions when US investment office Archegos collapsed after its bets on several tech stocks backfired.

Then came the demise of supply chain finance firm Greensill – which counted ex-Prime Minister David Cameron as an adviser – prompting Credit Suisse to close funds in which clients had invested more than £8billion.

Later that year it pleaded guilty and paid fines totalling around £400million over Mozambique’s so-called ‘tuna bond’ scandal, involving a fundraising that had been meant to pay for a fishing fleet but saw much of the money kicked back to officials and bankers.

Ulrich Koerner took over as Credit Suisse chief executive in August last year with a plan to spin off part of its investment banking arm and sell other higher-risk parts of the business.

But when Koerner said the lender was at a ‘critical moment’, investors were rattled – even though chairman Axel Lehmann boasted it would soon be ‘rock solid like our Swiss mountains’.

An exodus of funds last year saw £99billion of cash withdrawn in the fourth quarter. Last month, the bank reported a £6.5billion annual loss, its worst since the financial crisis, and warned of another year in the red for 2023.

Then the collapse of California’s Silicon Valley Bank provoked a global market sell-off. And when Credit Suisse’s biggest backer ruled out putting in any more money, its fate was sealed. 

Even a £45billion lifeline from the Swiss National Bank was not enough to save it and its rival stepped in – despite reports last week that neither had been keen on a tie-up.

Then, along came UBS, which traces its own history back to 1862. UBS was bailed out during the financial crisis but has since paid off a central bank loan.

But today – led by Ralph Hamers – it looks a picture of health compared with Credit Suisse.

And analysis suggests that by bringing together the Switzerland-focused parts of the two banks, the tie-up could bring savings worth billions that will dwarf the deal’s price.

Jerry del Missier, a former senior Barclays executive, reckons the deal will ‘almost certainly be a huge success’.

‘They have acquired a well-capitalized bank for less than nothing and will have seen their position in wealth and asset management strengthen considerably,’ he added.

This post first appeared on Dailymail.co.uk