UBS and Credit Suisse are calling their shareholders, who will not be able to vote on the bailout

Credit Suisse (CS) and UBStwo main ones banks from Swiss, will hold their AGMs separately this week. And they will do so in a climate of high tension after helping to controversially save the former. The appointment should pave the way for their merger before the end of the year, forced to be serious financial crisis from CS.

After a March that saw it on the brink of bankruptcy, Credit Suisse will hold a general meeting on April 4, while UBS, which bought its rival at a bargain price and with strong public support, will do so the following day. many unknowns about what both encounters can give.

The the purchase of Credit Suisse by UBSagreed on March 19, will be debated but not put to a vote, as the agreement documents make clear. The transaction is “not subject to shareholder approval”it says in the document.

The delicate situation that the first of these banks was going through and the systemic risk it represented for the international banking system as a whole and the Swiss economy forced the adoption of emergency procedures for signing the acquisition, thereby avoiding the normal procedure of giving shareholders six weeks to make a decision.

change at the head

After two assemblies, The USB controller will change hands: current CEO, Dutch Ralph Hammershe will be replaced by a Swiss Sergio Ermottiwho already ran the Zurich bank between 2011 and 2020, will now return to oversee the complex takeover process.

A banking giant that doubles Switzerland’s GDP

The purchase will convert to UBS in a giant whose market value is twice the GDP of Switzerlandwhich worries analysts because of its possible power to put pressure on Swiss finances, but also the risk of discrediting them, which have already suffered a heavy blow to their centuries-old image with the collapse of Credit Suisse.

Analysts will be watching carefully to see if details of the economic and operating costs of the acquisition being calculated are presented at the general meetings. could mean the elimination of 10,000 jobs and the closure of 75 bank branchesthat is, a quarter of the staff and offices in both entities together.

It is also expected to know what tone the board of directors will adopt Credit Suisse after a dark year for the bank due to financial and image problems it ended up losing up to 90% of the value of its shares in that periodwhich will undoubtedly hurt many of its major investors.

starting with him Saudi National Bankwho at the end of 2022 became the main shareholder of the entity by investing 1,500 million francs (1,509 million euros) in a 9.8% stake in the entity which, after the purchase by UBS, eventually became worth on the market only 300 million francs ( 301 million euros).

The Saudi National Bank was in any case one of the big triggers of the final death throes of the crisis, when on March 15 its president Ammar al-Khudairy announced that it would no longer invest in the Swiss entity, at a delicate time for the global banking sector due to the collapse Silicon Valley Bank.

That comment contributed to a 24% drop in Credit Suisse shares on the same day: it does not seem coincidental that afterwards, last week, the Saudi CEO resigned citing “personal reasons”.

Another open front: lawsuits from bondholders who lost their money

Another topic that could be discussed is that of lawsuit who prepare bond holders that they lost all their money in the buying operation. And that is that the AT1 bonds linked to the bank (they form part of the protective layer of the entity’s capital), worth 16,000 million francs (16,100 million euros), were reduced to zero by the decision of the Swiss authorities in order to facilitate the purchase business.

This unprecedented measure – bondholders are usually protected from losses rather than as shareholders – worries the European bond market, which is around 275,000 million euros and could lose its attractiveness if many bondholders fear that in the event of difficulties, such as happened here, could be the main big losers.

UBS bought Credit Suisse for 3,000 million francs (3,019 million euros), which is a price 60% lower than the subject had at the time on the stock exchange, with the great help of the Swiss government, which offered up to 100,000 million francs of liquidity (100,600 million euros) and guarantee to UBS to cover losses of up to 9,000 million francs (9,060 million euros).

Credit Suisse, with a 167-year history, chained two years of millionaire losses: in 2021 they amounted to 1,572 million Swiss francs (1,580 million euros), and in 2022 they almost quintupled to 7,293 million francs (7,340 million euros).

Among the main factors behind these bad accounts and investor mistrust was their exposure to risky companies that had failed in previous years, such as US hedge fund Archegos or Anglo-Australian financial services firm Greensill.

The financial problems were compounded by many others related to the bank’s reputation, with several resignations of its directors mired in various scandals.

This April, the debate on the situation in Swiss banking will surpass the meetings of the shareholders of the two entities and will also be taken to The Swiss Parliament, which will hold an extraordinary session from April 11 to 13 to discuss the causes of the Credit Suisse crisis and the state aid given to UBS to acquire it.