Switzerland Bank Mergers & Acquisitions (Credit Suisse Group)

Photo: Credit Suisse' head office in Zurich/ Zürich. Photo credit: Credit Suisse.

Copyright: Credit Suisse 

Credit Suisse Group (1856 to 2023)

Credit Suisse

Credit Suisse began life as Schweizerische Kreditanstalt (SKA, literally, the Swiss Credit Institution) in 1856 in Zurich. The bank was established by Alfred Escher, a prominent politician in the young Swiss Confederation and also the managing director of Nordostbahn (literally, Northeast Rail). By creating a local bank, Mr. Escher hoped to rely on Swiss capital rather than French capital in building a Swiss rail system. Throughout the next 40 years, SKA played a significant role in financing the construction of the Swiss rail network. During the period, the bank also helped create other financial companies, including insurer Swiss Re in 1863. 

In 1870, Vienna and New York became the locations of the bank’s first international offices. During the 1890s, SKA participated in the founding of a host of international banks: including Dreyfus & Co. in Frankfurt, the Zürcherisch-Amerikanische Trustgesellschaft, and perhaps most notably, the Banca Commerciale Italiana in 1894, which evolved into today’s Intesa Sanpaolo group. 

In the 1900s, the bank turned its attention to financing the construction of the electric grid network and other industries. Beginning in 1905, domestic branches were opened outside of Zurich for the first time when the bank took over a number of regional banks. 

Meanwhile, the bank’s Paris office opened in 1910. In 1940, the bank established an American subsidiary to underwrite securities. In that same year, the French, Italian and English names were introduced for the first time, including the name Credit Suisse. World War I and World War II devastated Europe and Credit Suisse’ international operations. As a neutral country, however, Switzerland escaped physically unharmed, and the bank fared far better than other European banks. Many clients had also transferred their assets to Switzerland for safe-keeping during World War II. Detailed revelations that Credit Suisse’ and other Swiss banks’ role in financing the Nazi war machine only surfaced some 50 years after the end of the war. Meanwhile, it was also discovered that a number of Swiss banks including Credit Suisse concealed information about dormant bank accounts left by many European Jews who perished during World War II. 

Credit Suisse opened a representative office in London in 1954, three years after an office was opened in Montreal. In 1969, the bank expanded its operations to Hong Kong. The bank bought 80% of precious metals refiner Valcambi in 1967, and the rest in 1980. However, the Valcambi subsidiary was subsequently divested. 

In 1976, Credit Suisse acquired Schweizerische Bodenkreditanstalt, further bolstering its domestic operations. The bank became a member of the New York Stock Exchange in 1982, greatly expanding its trading capacity and product lines. In 1989, CS Holding became the parent company of Credit Suisse.

First Boston Corp. 

First of Boston Corp. was created in 1932 as the investment banking subsidiary of the First National Bank of Boston. In the following year, however, the Glass-Steagall Act in the United States forced all banks to separate their investment banking activities from traditional personal and commercial banking to ensure risky investment losses could not harm deposit-taking banks. The First National Bank of Boston in 1934 spun off First of Boston Corp., which was re-named First Boston Corp. Until 1969, First Boston was America's only publicly-traded major investment bank. 

Credit Suisse' long association with the First Boston Corp. began in 1978 when the Credit Suisse’s 76%-owned subsidiary Credit Suisse et de White Weld took a 25% interest in First Boston Corp. in stock. Credit Suisse et de White Weld then named itself Financiére Crédit Suisse-First Boston, which was now 46% owned by Credit Suisse, 31% owned by First Boston Corp. and the rest by management and other minority holders. Despite their long partnership, however, relationship between Credit Suisse and First Boston had been rocky. This could be partly blamed on the complex web of cross-holdings between all three companies: Credit Suisse, First Boston and CS First Boston. 

Managing all three separate but related businesses was cumbersome and worse still, they competed against each other. After First Boston suffered severe losses in the 1987 Black Monday stock crash, a major restructuring in 1988 merged First Boston into CS First Boston, which was now 44.5% owned by a new parent company called CS Holding. However, business remained poor and by 1990, Credit Suisse had to pumped USD $300-million into CS First Boston, raising its stake to 73%. This marked the first time a foreign bank had obtained majority control over a major Wall Street underwriter. 

Between 2020 and 2022, Credit Suisse was embroiled in a series of scandals exposing its repeated reckless, corruption, illegal, and fraudulent behaviours. The Swiss bank formerly known for its sterling and rock-solid reputation suffered massive financial losses and a gradual erosion of confidence. Several financial-sector regulators around the world also slapped significant fines on Credit Suisse. Meanwhile, investigative journalism and tax authorities also exposed the secret tax-evading dealings and client details that Swiss banks have been famous (or infamous) for for decades, leading to further uneasiness of depositors.

In late 2022, news media began to report a steady net outflow of deposits at Credit Suisse. The multi-billion Swiss Francs investment by Saudi National Bank and Qatar Investment Authority meant to shore up Credit Suisse's capital not only failed to stem the loss of confidence, but might have further highlighted the bank's dire situation. 

The final nail in the coffin came in March 2023 when tech start-up specialist bank Silicon Valley Bank and crypto-currency lender Signature Bank experienced bank runs in quick succession and were taken over by the Federal Reserve. During the weekend of 13th March, 2023, Credit Suisse's largest shareholders refused to inject more money into the Swiss bank. A CHF 50-billion liquidity guarantee from the Swiss central bank set the motion of the demise of Credit Suisse. The fact is: once a bank loses the confidence and trust from the depositors, bondholders and investors, history has shown that a state rescue in the form of full government guarantees on the bank's deposits and a complete change in management in unavoidable. In most such cases, the bank's bondholders and shareholders would suffer catastrophic losses on their investment.

Recent transaction(s):

• In 1990, Credit Suisse bought Switzerland’s oldest bank, Bank Leu (founded 1755).
• In 1993, Credit Suisse outbid rival Union Bank of Switzerland and bought Schweizerische Volksbank, the country's 5th largest bank, for CHF 1.6-billion (USD $1.1-billion).
• In 1995, Credit Suisse bought Neue Aargauer Bank, a regional lender in Switzerland.
• In 1996, reports surfaced that both Switzerland and its banks collaborated with Nazi Germany during World War II, and that dormant bank accounts left behind by Holocaust victims were never disclosed to their potential survivors and estates. Following a firestorm of protests from Jewish leaders and threats from the U.S. to boycott Swiss banks, the Swiss National Bank, Credit Suisse, SBC and UBS contributed CHF 270-million into the Humanitarian Fund for the Victims of the Holocaust. Then in 1998, Credit Suisse and UBS further agreed to a USD $1.25-billion (CHF 1.8-billion) settlement with the claimants of the Holocaust class-action lawsuits.
• In 1997, parent company CS Holding was renamed Credit Suisse Group.
• In 1997, Credit Suisse bought Swiss insurer Winterthur Insurance Co. for CHF 13.37-billion (USD $8.8-billion). Following years of mediocre profitability, Credit Suisse sold Winterthur to France's AXA S.A. in 2006.
• Also in 1997, Credit Suisse bought Barclays de Zoete Wedd’s (BZW) European investment banking operations from Barclays plc for about GBP 100-million.
• In 1998, Credit Suisse bought Brazil's Banco de Investimentos Garantia SA for USD $675-million.
• In 1999, Credit Suisse bought Warburg Pincus Asset Management from Warburg, Pincus & Co. for USD $650-million, gaining USD $22-billion in assets under management.
• In 2000, Credit Suisse bought U.S. investment bank Donaldson, Lufkin & Jenrette Inc. (DLJ) from France's AXA S.A. for USD $13.6-billion. The purchase was ill-timed, as a major global bear market started in 2001.
• In 2003, Credit Suisse sold its British non-life insurance operations, Churchill, to the Royal Bank of Scotland for GBP 1.1-billion. Churchill had 7.5-million clients.
• Also in 2003, Credit Suisse sold Winterthurs’s Italian operations to Unipol Assicurazioni SpA for Eur 1.46-billion.
• In 2003, Credit Suisse sold its Pershing unit to the Bank of New York Co. for USD $2-billion. Pershing also repaid a USD $480-million subordinated loan to Credit Suisse.
• Also in 2003, Credit Suisse sold its precious metals refiner Valcambi S.A. to European Gold Refineries Holding S.A. (EGR).
• In 2005, Credit Suisse First Boston was fully integrated into Credit Suisse.
• In 2006, Credit Suisse sold its insurance subsidiary Winterthur to France’s AXA S.A. for CHF 12.3-billion.
• In 2007, the bank’s four private banks Clariden, Bank Leu, Bank Hofmann and Banca di Gestione Patrimoniale were consolidated into the new Clariden Leu.
• In 2007, Credit Suisse bought 50% of Brazilian asset manager Hedging-Griffo, for BRL 635-million (CHF 421-million, USD $364-million).
• Following heavy losses suffered during the global credit meltdown in 2007 (loss of CHF 7.76-billion) and 2008 (loss of CHF 8.2-billion), Credit Suisse raised CHF 10.4-billion of fresh capital in October 2008 by issuing treasury shares, convertible bonds and other hybrid securities.
• In December 2008, Credit Suisse sold part of its Global Investors asset management business in return for up to 23.9% of the enlarged Aberdeen Asset Management. Value of the asset swap was estimated to be GBP 250-million (CHF 381-million).
• In December 2010, Credit Suisse sold a soured commercial property loan portfolio with a book value of USD $2.8-billion for USD $1.2-billion to Apollo Management.
• In the late 2010s and early 2020s, Credit Suisse' reputation suffered badly from several years of high-profile and financially costly scandals. Confidence on the bank waned and the bank reported over CHF 100-billion of deposit withdrawals in the final quarter of 2022. 
• Between October 2022 and January 2023, the Saudi National Bank and the Qatar Investment Authority jointly injected almost CHF 3-billion into Credit Suisse as its CHF 4.2-billion re-capitalization, raising the two Middle Eastern institutional investors' stake to almost 17% of the Swiss bank.
• In March 2023, the collapse of high-tech specialist Silicon Valley Bank and crypto-currency lender Signature Bank in the U.S. led to a confidence crisis in other banks with weak liquidity or reputation. The Financial Times reported that customers were withdrawing CHF 10-billion a day from Credit Suisse and the bank was on the verge of collapse. During the week of 13th March, 2023, after Credit Suisse's largest shareholder Saudi National Bank refused to inject more capital to strengthen its capital, the Swiss National Bank stepped in and offered CHF 50-billion (USD $54-billion) of liquidity assistance to Credit Suisse. But once confidence on the bank has been lost, the fatal fate of Credit Suisse had been sealed.
• On 19th March, 2023, UBS agreed to take over the crisis-laden rival Credit Suisse Group for roughly CHF 3.0-billion (USD $3.23-billion) in an all-stock deal brokered and pre-approved by the Swiss National Bank, Swiss Federal Department of Finance and other financial regulators. Credit Suisse shareholders would received one UBS share for every 22.48 Credit Suisse shares held, which was equivalent to CHF 0.76 per share, or about 40% of the closing price on Friday 17th March, 2023, in New York trading. The deal would not require shareholders' approval. Holders of CHF 16.0-billion (USD $17.5-billion) worth of Credit Suisse Additional Tier 1 or AT1 bonds suffered 100% loss as their bonds' convertibility was legally nullified in the case of restructuring. In the takeover, UBS agreed to accept up to CHF 5.0-billion (USD $5.4-billion) in losses from taking over Credit Suisse's operations, but Swiss authorities also agreed to guarantee against further CHF 9-billion (USD $9.7-billion) of losses stemming from certain Credit Suisse' non-core assets. In addition, the Swiss National Bank would provide CHF 100-billion (USD $108-billion) of liquidity guarantees to UBS and Credit Suisse to calm jitters about the battered Swiss banking sector.

Click here to return to the Index page.