Credit Suisse Group AG’s investment banking and trading operations are a key sticking point in the government-brokered talks for rival UBS Group AG to take over the troubled lender, according to people with knowledge of the matter.
(Bloomberg) —
Credit Suisse Group AG’s investment banking and trading operations are a key sticking point in the government-brokered talks for rival UBS Group AG to take over the troubled lender, according to people with knowledge of the matter.
UBS is worried about the balance sheet risk associated with the investment bank, which has suffered a string of losses and scandals in recent years, the people said, asking not to be identified at the matter is private. It’s concerned about businesses including leveraged finance, which has been in the crosshairs of regulators in recent months, the people said.
UBS declined to comment.
UBS is considering taking over all or parts of Credit Suisse in a deal favored by local regulators that would address a rout in its smaller rival that sent shock waves across the global financial system this week. Panicked investors dumped its shares and bonds following the collapse of several smaller US lenders. A liquidity backstop by the Swiss central bank this week briefly arrested the declines, but the market drama carries the risk that clients or counterparties would continue fleeing.
Excluding the investment bank would also limit how much an acquisition would bulk up UBS’s size. The investment bank division held almost one-third of Credit Suisse’s risk-weighted assets, which help determine how much capital is needed, at the end of December.
Talks are accelerating on a potential deal, according to two people with knowledge of the matter. While Swiss authorities want to get an accord in place quickly, other potential areas of contention include the size of the government guarantee that UBS is demanding to take over Credit Suisse.
The goal is for a announcement between the two banks by Sunday evening at the latest, according to a person familiar with the matter, who asked not to be identified discussing the talks. An announcement could even emerge as soon as Saturday evening, the Financial Times reported.
Discussions around the investment bank are also putting the future spinout of some of the strongest businesses under the Credit Suisse First Boston brand in the spotlight. That process was starting this year under star dealmaker Michael Klein, who is in the process of selling his own advisory boutique to the Swiss bank.
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