Uday Kotak, the managing director of Kotak Mahindra Bank, tweeted his “alert for all bankers and stakeholders” after the acquisition of the Credit Suisse Group AG by UBS Group AG on Monday.
The CEO of Kotak Mahindra Bank stated that the Credit Suisse incident demonstrated the necessity of risk-return analysis in investments regardless of the size of a financial organization.
“Credit Suisse sold to UBS for 3 billion $. 60% discount to shares value at Friday closing,” the billionaire stated in a tweet. A 600-billion-dollar balance sheet was sold for three billion dollars in equity value. AT1 bonds of $17 billion were wiped down. When concern with scale overtakes the risk-return matrix, it sends a signal to all bankers and stakeholders.”
UBS will pay $3.3 billion to acquire Credit Suisse
UBS agreed to acquire Credit Suisse in a historic, government-brokered transaction aimed at addressing a confidence crisis that had begun to spread throughout global financial markets.
In an all-share transaction that involves hefty government guarantees and liquidity protections, the Swiss bank is paying $3.2 billion for its rival. The price per share was down 99% from Credit Suisse’s 2007 high.
The Swiss National Bank is providing UBS with 100 billion Swiss francs in liquidity assistance, while the government is providing a 9 billion franc guarantee for any losses from assets UBS is acquiring.
According to Finma, around 16 billion francs in Credit Suisse bonds known as AT1s will become meaningless to ensure investors help pay the costs.
UBS Chief Executive Ralph Hamers told Swiss radio SRF that the risks of acquiring Swiss rival bank Credit Suisse are manageable.
Hamers, who would lead the combined business as CEO, stated that UBS would be able to handle the risks associated with a so-called superbank.
“UBS has a very good capital ratio as well as a very good liquidity position. As a result, we have reduced market risks “Hamers stated in an interview that aired early Monday.
“The second phase is for us to convert CS’s investment bank into an investment bank similar to UBS’s. This is referred to as a capital-light investment bank. We are not taking as many risks this way.”
He stated he didn’t have any data on layoffs at Credit Suisse right now, but there would always be cost cuts.
Still, he stated that there were no firm plans in the works.
“There are prospects and potential for advancement. The employees that CS employs, 50,000 people worldwide will also have a new future with us. And by working together, we can create an even more attractive bank.”
He noted that the planned takeover would provide security and stability to the Swiss financial industry as well as Credit Suisse clients.
“With the takeover, we are restoring stability and security to CS clients,” Hamers explained. “But we must also maintain the Swiss financial center’s repute.”
