Crash for Credit Suisse stock

Its stock plummets Credit Suisse at the start of its trading, on Monday morning, one 24 hours after the announcement of the acquisition by UBS. The share price fell to 0.71 Swiss francs, plunging more than 60%.

The opening of the European stock markets was also down, with the markets evaluating the data of the historic Credit Suisse agreement and UBSwhose stock is also down 8%.

In the morning, Paris fell 0.83%, Frankfurt fell 1.06% and London lost 1.01%. The pan-European STOXX 600 index fell 0.8%.

The historic Credit Suisse and UBS deal

It is recalled that the historic agreement for the acquisition of Credit Suisse by UBS was officially sealed on Sunday evening by the Swiss central bank, with the consideration eventually amounts to 3 billion Swiss francs ($3.23 billion) in stocks, while UBS agreed to take up to 5 billion francs ($5.4 billion) in damages.

The acquisition agreement includes the central bank liquidity provision of 100 billion Swiss francs ($108 billion) to Credit Suisse and UBS; but also a guarantee from the state for possible damages. Specifically, the federal government grants UBS a guarantee of 9 billion francs to absorb potential losses from certain assets that UBS takes over as part of the transaction, as long as any future losses exceed a certain threshold.

In the meantime, “the extraordinary state support will cause the full impairment of the nominal value of all AT1 securities of Credit Suisse of approximately 16 billion francs, and therefore an increase in core capital,” announced the Swiss regulatory authority (FINMA).

It is noted that Credit Suisse was finally valued at 0.76 francs per sharewhile on Friday its title closed at 1.86 francs.

“With the acquisition of Credit Suisse by UBS, the solution was found to ensure financial stability and protect the Swiss economy in this extraordinary situation,” she said. central bank of switzerland in the framework of a press conference granted this evening.

“In this situation of extreme uncertainty, the acquisition of Credit Suisse by UBS made it possible to find a solution to guarantee financial stability and to protect the Swiss economy,” the central bank said in a statement.

In his statements the president of the Swiss Confederation Alain Berchet pointed out that the deal to buy Credit Suisse is the best way to restore confidence.

This solution “is not only decisive for Switzerland, but for the stability of the entire global financial system”, he emphasized, during the press conference in the presence of the presidents of the two Swiss banking giants, Colm Kelleher for UBS and Axel Lehman for Credit Suisse.

Finance Minister Karin Keller-Sutter said the bankruptcy of Credit Suisse could cause “irreparable financial damage”. “For this reason, Switzerland must take its responsibilities beyond its borders.”

The historic merger of the two banking giants, which are among the 30 too-big-to-fail clubs, had to be completed and announced before the opening of Asian markets, with the hope that the move would be enough to head off the widespread panic.

The plan, which was negotiated in hastily arranged crisis talks over the weekend, is aimed at countering the massive fall in Credit Suisse’s stock last week after smaller US banks collapsed. A liquidity support from the Swiss central bank within the week failed to end market jitters despite initial relief.

The American authorities they worked with their Swiss counterparts as both banks have operations in the US and are considered systemically important in Switzerland, seeking an agreement before the opening of Asian markets.

It is recalled that earlier it was known that UBS had made an offer of $1 billion, which Credit Suisse had called too lownoting that it will hurt shareholders and employees who own company shares, according to what Bloomberg had reported.

The Swiss authorities had also considered a full or partial nationalization of Credit Suisse as the only viable option other than a takeover by UBS.