After a difficult week for Switzerland's second-largest bank, Credit Suisse, the fate of Credit Suisse could be determined in just 36 hours.
Customers and investors pulled their money from Credit Suisse in the last few days, as turmoil gripped the global banking sector following the collapse of two US lenders. The bank's shares fell 25% during the week despite a $54 billion emergency loan from Swiss National Bank. Record highs were reached in the price of financial contracts that protect investors from possible losses on bonds.
Morningstar reports that more than $450 million was taken from US and European funds by the bank between Monday & Wednesday.
After the stock crashed to a new low on Wednesday night, the Swiss central bank announced a rescue plan. Credit Suisse (CS), however, was purchased shortly after. Analysts began to speculate that a rescue operation would be necessary. Reports started swirling about a possible takeover of Credit Suisse (CS) by UBS (UBS).
According to Reuters and Financial Times, sources familiar with the matter reported that Swiss regulators had urged banks to reach a deal before Monday's markets opened to boost confidence in the country’s banking system. According to the Financial Times, the Credit Suisse and UBS boards were expected to meet separately this weekend.
Both Credit Suisse and UBS declined to comment on Reuters.
BlackRock (BLK), which holds 4% of Credit Suisse, denies a separate report in The Financial Times that it was preparing an alternative bid for the bank.
CNN was informed by a spokesperson for BlackRock that 'BlackRock isn't participating in any plans or to acquire any part of Credit Suisse and has no interest doing so'.
Credit Suisse, one of the most important banks in the world financial system, has been struggling for years after a string of scandals, large losses, and strategic missteps. The stock has fallen 75% in the last 12 months. However, the crisis of confidence grew rapidly this month.
Investors fled other weak players after the failure of Silicon Valley Bank, the largest US lender, last week.
Credit Suisse then dropped another bombshell. Credit Suisse, a 167-year-old bank, published its annual report Tuesday. It acknowledged that it had'material weaknesses' in its financial reporting and added that it had failed adequately to identify potential risks.
After spending $1.5 billion to acquire a stake of nearly 10%, the Saudi National Bank, the largest shareholder, made it clear that it would no longer be investing any additional money in the bank. This spooked investors.
JPMorgan bank analysts stated that UBS takeover was most likely in a Thursday note.
UBS will likely spin-off Credit Suisse's Swiss business as the combined market share of Credit Suisse would account for about 30% of Switzerland’s domestic banking market. This would mean that there would be too much concentration risk and control, they said.
The Neue Zurcher Zeitung, a newspaper in Zurich that covers both banks, published Saturday an article stating that Credit Suisse's future would be decided by Saturday. It said that the Swiss government would make a statement Sunday evening.