European markets plunge following Credit Suisse acquisition

The pan-European Stoxx 600 was down 0.6% at 9:00am GMT, with financial services falling 3.3%.

All this has come following a week of turmoil in the bank sector ending with the news that UBS has acquired Credit Suisse, with the £2.6bn deal completed just hours before the financial markets opened.  

Late last week (16 March) the troubled Swiss banking giant said it would borrow up to 50bn francs (£44.5bn) from the Swiss central bank, in an attempt to regain the confidence of its investors following a series of scandals and setback.  

Discussions between the two parties were initiated jointly by the Swiss Federal Department of Finance, FINMA and the Swiss National Bank, with the combination expected to create a business with more than $5tn (£4.1tn) in total invested assets and sustainable value opportunities. It’s also expected to generate annual run-rate of cost reductions of more than $8bn (£6.5bn) by 2027.  

UBS chairman Colm Kelleher said, while the acquisition is an attractive one as far as his shareholders are concerned, for Credit Suisse the deal is an emergency rescue. He said: “We have structured a transaction which will preserve the value left in the business while limiting our downside exposure.  

“Acquiring Credit Suisse’s capabilities in wealth, asset management and Swiss universal banking will augment UBS’s strategy of growing its capital-light businesses. The transaction will bring benefits to clients and create long-term sustainable value for our investors.” 

UBS chief executive Ralph Hamers added: “Bringing UBS and Credit Suisse together will build on UBS’s strengths and further enhance our ability to serve our clients globally and deepen our best-in-class capabilities. 

“The combination supports our growth ambitions in the Americas and Asia while adding scale to our business in Europe, and we look forward to welcoming our new clients and colleagues across the world in the coming weeks.” 

Axel Lehmann, chairman of Credit Suisse – which has described the deal as a “merger” – said: “Given recent extraordinary and unprecedented circumstances, the announced merger represents the best available outcome.  

“This has been an extremely challenging time for Credit Suisse and while the team has worked tirelessly to address many significant legacy issues and execute on its new strategy, we are forced to reach a solution today that provides a durable outcome.”