UBS on track for biggest gain since Mar 2020 post Credit Suisse takeover

By Thyagaraju Adinarayan and Allegra Catelli

UBS Group AG jumped as much as 10%, on track for its biggest gain since March 2020, as investor optimism about the takeover of its largest rival gathered pace. 
 

The Swiss firm led European banking stocks higher as fears around the stability of the finance sector eased after UBS’s emergency acquisition of Credit Suisse Group AG. UBS is poised to add almost 6.6 billion Swiss francs ($7.1 billion) to its market value since the historic deal was announced late Sunday.

The government-brokered, 3 billion franc rescue was intended to put an end to a crisis of confidence at Credit Suisse and stem contagion through the global financial system that started with the collapse of Silicon Valley Bank. The deal values Credit Suisse at a fraction of its previous price, with a raft of government backstops and guarantees to help ease the pain for UBS.

For UBS investors, the deal offers plenty of advantages: It’s gaining valuable assets such as Credit Suisse’s Swiss business and access to its roster of wealthy clients and sizeable asset base, at a rock-bottom price. It will also allow the bank to cherry pick the best talent at its rival.

UBS rose 8.5% to 18.80 francs at 3:51 p.m. in Zurich.

Still, UBS had its credit outlook lowered by S&P Global Ratings and Moody’s Investors Service because of the integration and restructuring challenges it faces. 

The Swiss lender’s rating outlook was cut to negative from stable by both firms, with analysts citing the risk of client attrition and the complex task of running down Credit Suisse’s trading operations. UBS’s long-term rating was affirmed by S&P at A- and its senior unsecured rating was affirmed at A3 by Moody’s.