On Sunday evening came the news that the Swiss crisis bank Credit is being bought up by competitor UBS for over 2 billion dollars (close to 21 billion kroner) in shares. Thus, the country’s largest bank takes over the second largest.
Credit Suisse’s market capitalization was just over SEK 80 billion on Friday. In January 2022, the value was over SEK 450 billion. But the bank is suffering with a lot of realized losses due to bad business for a long time. Last year’s loss was SEK 84 billion.
— UBS is more profitable and if they buy Credit Suisse cheaply enough, it could be a good deal, says Per Strömberg to TT.
Takes a big risk
— UBS does not pay market price when you step in like this as a shareholder in an emergency. UBS can hardly have had time to do a solid due diligence (acquisition investigation) of Credit Suisse in just a few days. But UBS is taking a big risk and if they don’t get crap from their shareholders, it has to be an incredibly good deal.
The banking crisis started in California at Silicon Valley Bank and continued with a number of regional banks in the United States. But unlike them, Credit Suisse is a systemically important bank with many connections to the international financial system.
— There is a general uncertainty about how badly off it is in the financial world: Which is the next bank to fail? What are the hidden losses? Are there major banks here in Europe that have the same problems as Silicon Valley Bank?
Next time
TT: How do the banking crises in the US and Switzerland interact?
“There are no direct financial links between the American banks and Credit Suisse,” says Per Strömberg.
— But there is a general mistrust right now among investors, and especially towards banks.
When and where the next center of crisis in the banking world will appear is difficult to assess, according to Per Strömberg:
— It is sometimes said that there are European banks that are sitting on so-called zombie loans, i.e. loans to borrowers who have stopped paying, but the banks pretend it’s nothing to avoid taking a credit loss.
Done before
Per Strömberg calls the fact that UBS takes over the competitor Credit Suisse so quickly, the talks started in the middle of the week, “a proven technique”:
— That’s what happened with (the American investment bank) Bear Stearns when JP Morgan Chase was more or less forced to step in and buy the bank in 2008.
When TT spoke to Per Strömberg on Monday, he was not worried that this banking crisis will lead to a repeat of the global financial crisis in 2008. That assessment remains on Sunday evening despite the developments this week.
TT: How do you see the risk of spread to Sweden and, for example, the property market here?
— The Financial Supervisory Authority and others will probably come out and quite forcefully say that we have good control over the real estate loans in the Swedish banks, so as not to risk the market becoming worried. And I actually think it’s true that they have a clue, he replies.