UBS is in talks to take over Credit Suisse

Banks have discussed a number of scenarios, including one that ends with UBS taking over all or parts of Credit Suisse, according to people familiar with the situation.

UBS has long been seen as part of any state-backed solution for Credit Suisse, which has a balance sheet roughly half the size of UBS’ $1.1 trillion in assets. Any large-scale acquisition would give UBS award-winning companies within Credit Suisse, such as to wealth clients in Asia and the Middle East, but could come with unwanted units such as struggling investment bank Credit Suisse. It could also derail UBS’ current strategy and perceived stability with investors.

UBS has a market capitalization of about $65 billion, compared to $8 billion for Credit Suisse, according to FactSet..

Both banks are systemically important in Switzerland and globally, and their combination could be subject to additional control and capital charges.

The Swiss authorities are expected to reach at least a rough deal before the market opens on Monday. A spokesman for financial regulator Finma and the Swiss National Bank declined to comment. A spokeswoman for the Finance Ministry said it did not comment on the rumours.

The talks, which were previously reported by the Financial Times, may not result in a deal between Credit Suisse and UBS. They are the two largest banks by assets in Switzerland, serving savers and businesses there, and wealthy clients around the world. Both have Wall Street investment banks and large asset management arms.

UBS may not be the only player in the mix. Other financial institutions are looking into the situation to see if they can buy parts of Credit Suisse or return bids, people familiar with the effort said.

Some of the bank’s investment businesses have long been coveted by large asset managers, including its European real estate and American asset management arms. Credit Suisse executives have repeatedly rejected these offers, arguing that asset management was an essential part of its operations.

Credit Suisse’s slide towards government aid came after other banks and major investors withdrew last week from dealings with the Swiss lender. Other investment firms stopped doing business with the bank in the fall, people familiar with the matter said, as its years-long woes worsened.

Analysts were concerned about wealthy clients withdrawing their money. Other bank executives said they had received inflows from Credit Suisse clients last week.

Using UBS to bail out Credit Suisse marks a turnaround from nearly 15 years ago, when Switzerland bailed out UBS after it became stuck with billions in toxic assets in its US business. Credit Suisse refused state aid at the time and emerged from the crisis stronger.

It has subsequently been hit by tougher financial regulation and costly settlements with regulators. The bank has undergone a series of restructurings. Credit Suisse’s newest management team, some formerly at UBS, has pleaded to be given more time to prove they can turn things around.

Patricia Cosman contributed to this article.

Write to Justin Baer at [email protected], Margot Patrick at [email protected], and Ben Dummett at [email protected]