Credit Suisse rescue: The biggest winners and losers from UBS's historic deal
- UBS agreed to take over rival bank Credit Suisse for just over $3 billion Sunday.
- The Swiss government forced through the deal in a bid to quell fears of a global banking crisis.
UBS agreed to buy longtime rival Credit Suisse on Sunday in a historic deal that'll merge two of Europe's biggest banks.
The Swiss government forced through the 3 billion franc ($3.25 billion) deal, which came after Credit Suisse's Zurich-listed shares plunged 70% in a single week as the collapse of SVB Financial sparked fears of a global banking crisis.
Here are the main winners and losers from the biggest story in markets right now:
Losers: Credit Suisse
The 167-year-old Swiss bank stands out as the biggest loser from Sunday's rescue deal.
The global banking crisis that erupted last week weighed on Credit Suisse's already battered stock, which plunged 70% in the space of five days.
Now, the onetime banking titan has been forced by its own government to accept a takeover bid from its biggest rival, which values it at less than half its market capitalization as of Friday's closing bell.
It's hard to think of a more humiliating fall from grace since the 2008 financial crisis.
The Zurich-based bank has snapped up its longtime rival at a fraction of its market value – and can draw on support from its government and the Swiss National Bank to absorb some of its losses from the takeover.
UBS will see its assets under management swell to just under $2 trillion if it can complete the deal, according to data from S&P Global – which is more than the amounts managed by blue-chip US rivals like Goldman Sachs and Morgan Stanley.
But these are still uncertain times for European bank stocks – and that could take some of the shine off any potential deal, according to one analyst.
"Under normal circumstances, I would say it is an absolutely fantastic deal for UBS," Morningstar equity analyst Johann Scholtz said, per Reuters. "In the current environment, it is a bit more complicated as there is a lot of uncertainty generally in the markets."
Losers: Saudi Arabia, Qatar, and Norway
Some of the world's biggest investors are suffering this morning due to their exposure to Credit Suisse.
Top shareholder the Saudi National Bank – whose chairman helped to crater the Swiss bank's stock price by ruling out upping his stake on Wednesday – has lost 1.1 billion francs in just 15 weeks, according to data from Bloomberg.
The Riyadh-based bank loaded up on Credit Suisse shares for 3.82 francs ($4.12) apiece in November – way clear of the 0.76 francs that UBS will pay the Swiss lender's shareholders as part of its takeover deal.
Qatari and Norwegian sovereign wealth funds were other big investors in Credit Suisse, although Norway's Norges Bank Investment Management said Monday that it had trimmed its stake earlier this year.
Winners: Wall Street (for now)
JPMorgan, Bank of America, and the rest of Wall Street now have one less rival, with UBS chairman Colm Kelleher indicating on Sunday that there'll be cutbacks at Credit Suisse's investment bank.
The rescue deal could also help to contain some of the turmoil caused by the ongoing global banking crisis – although US investors are still fretting about regional bank First Republic, which saw its share price plunge 20% in Monday's premarket.
Credit Suisse's key role in the global financial system also meant that many had deemed it "too big to fail" and so Wall Street's largest banks could feel the aftereffects of Sunday's takeover.
"It's a bigger deal than the collapse of SVB because Credit Suisse has an investment bank," Morningstar Investment Management's CIO Dan Kemp told Insider last week. "It's more part of the banking plumbing – and so worries about its health have always been more of a concern."
Losers: AT1 bondholders
The Swiss regulator said Sunday that it would write down the value of Credit Suisse's 16 billion franc Additional Tier 1 bonds to zero.
The little known assets are special bonds that can be converted into shares if a bank's overall financial health falls below a certain level. They emerged after the 2008 financial crisis.
Analysts have warned that the regulator's move to write off the bonds could weigh on other European banks looking to sell such debt, meaning the UBS-Credit Suisse deal could extend rather than end the banking crisis.
"The Swiss financial regulator has ordered that Credit Suisse's AT1 bonds be written down to zero. That appears to have spooked investors and has led to a selloff in other bank debt and that's weighed on share prices," AJ Bell investment director Russ Mould said Monday.
"It means the banking crisis we've seen over the past few weeks has started a new chapter rather than reaching its ending," he added.
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