Switzerland Bank Mergers & Acquisitions (UBS)

Photo: When the Swiss Bank Corp. and Union Bank of Switzerland merged in 1998, management decided to keep the UBS name, but retained Swiss Bank Corp.'s logo. Shown above is an old Swiss Bank Eurocheque with a UBS Bank (Canada) advertisement in 2006, both featuring the same tri-key logo.


UBS AG

UBS AG was formed in 1998 when the Swiss Bank Corporation and the Union Bank of Switzerland merged. Domestically, UBS is a universal bank offering retail, corporate and investment banking, and asset management services. It also provides private banking for the wealthy. Abroad, the bank concentrates on commercial and investment banking activities for corporate clients, as well as private banking for wealthy individuals.

Swiss Bank Corporation

Swiss Bank Corporation (also Schweizerischer Bankverein; Société de Banque Suisse; Società di Banca Svizzera) can trace its history to 1854 when six private bankers in Basel joined forces to form the Bankverein. Like other Swiss banks, Bankverein participated in financing the country’s railway networks and manufacturing industry. In 1872, Basel-based Bankverein merged with Frankfurter Bankverein to form the Basler Bankverein, becoming a joint-stock bank in the process. Following a series of takeovers, the bank adopted the new name Schweizerischer Bankverein in 1896. In addition to the Basel head office, the bank now had offices in St. Gall and Zurich. In 1898, the bank opened its first international branch in London.

During World War I, Switzerland maintained neutrality and did not participate in the war. Still, Swiss banks suffered losses from the collapse of Swiss exports and a number of major industrial companies. Swiss Bank Corporation overcame the wartime slump relatively well as it didn’t incur major losses abroad. In 1917, the English name of the bank was changed from Swiss Bankverein to Swiss Bank Corporation.

The Depression in the 1930s was difficult times again for Switzerland. Just before the onset of World War II, however, the bank received a massive influx of foreign funds and bullion for safekeeping. In 1939, Swiss Bank Corporation opened an office in New York to store some of these assets for fears that even neutral Switzerland might be invaded by the Nazis.

In 1945, Swiss Bank Corporation took over the ailing Basler Handelsbank. Throughout the 1950s, the bank expanded exponentially due to the rebuilding boom in Europe. By 1962, SBC became the second largest bank in the country. Overseas offices were opened in the U.S., Canada, Japan, Hong Kong and Luxembourg between 1965 and 1975. In 1978, SBC took a majority interest in Geneva-based private bank Ferrier Lullin & Cie., S.A.

In 1982, SBC, Union Bank of Switzerland and Credit Suisse formed Premex AG to offer precious metals brokerage service to reinforce bullion trading in Zurich, as competition from other financial centres like New York and Hong Kong heated up.

Despite acquiring a few brokerages and investment banks in Britain and France in the late 1980s, SBC’s international operations remained weak as a result of its traditional Swiss conservatism. In 1992, however, SBC bought Chicago-based options specialist O’Connor & Associates to participate in the burgeoning derivatives market. Then in 1994, SBC bought U.S. fund manager Brinson Partners for USD $750-million. Brinson Partners had USD $36-billion of assets under management. Despite these acquisitions, however, SBC continued to suffer from mediocre profitability in the 1990s as a result of the global recession.

Union Bank of Switzerland

Union Bank of Switzerland (also Schweizerische Bankgesellschaft; Union de Banques Suisses; Unione di Banche Svizzere) was created in 1912 through the merger of the Bank in Winterthur (founded in 1862) and Toggenburger Bank (founded in 1863). Interestingly, the Bank in Winterthur back in 1872 participated in transforming the Basel’s Bankverein to the Basler Bankverein, which later became Swiss Bank Corporation.

Initially, the Schweizerische Bankgesellschaft had nine branches in eastern and northeastern Switzerland. In 1921, the English name of the bank was changed from the Swiss Banking Association to the Union Bank of Switzerland, conforming to the French version.

Like former rival SBC, UBS struggled through the turbulent times from the onset of World War I to the end of World War II. After losing its European assets outside of Switzerland during the wars, UBS purposely avoided the foreign market for 20 years. In 1945, it took over the insolvent Zurich-based Eidgenössische Bank. In the same year, UBS moved its dual-headquarters from St. Gall and Winterthur to Zurich, as the latter rose to become a prominent financial centre.

Despite opening an office in New York in 1946, UBS’ expansion in the 1950s and 60s otherwise focused on the domestic front, and a number of small banks were acquired. By 1962, UBS had 81 branches in Switzerland and had become the largest bank in the country.

In 1973, UBS acquired the remaining 20% of gold refiner Argor S.A. UBS had owned 80% of Argor since 1960.

UBS' international expansion happened rather later than SBC and Credit Suisse, with the first truly operational branches opening in London and Tokyo in 1967 and 1972 respectively. In 1970, UBS set up American UBS Corp. in New York to enter the massive American securities underwriting market. The bank also opened representative offices in Buenos Aires, Hong Kong, Sydney and Melbourne in 1969. Beginning in the 1970s, the bank actively pursued its expansion in the international private banking business and many offices were upgraded to full branches.

In 1984, UBS acquired 29.9% of British brokerage and fund manager Phillips & Drew, one of the largest in London. The year 1986 was a busy one for UBS: first, the bank bought the rest of Phillips & Drew; then it acquired Deutsche Länderbank; lastly, it sold 25% of its gold refiner Argor S.A. to Germany’s W.C. Heraeus. Argor was then renamed Argor-Heraeus S.A.

Recent transaction(s):

• In 1993, rival Credit Suisse outbid Union Bank of Switzerland in a battle for Schweizerische Volksbank. UBS then ended up acquiring five small Swiss banks in a consolidation wave in 1994.
• In 1995, Swiss Bank Corporation acquired British merchant bank S.G. Warburg plc for GBP 860-million (USD $1.37-billion), forming SBC Warburg.
• In 1996, SBC acquired Standard Chartered Bank’s international private banking business, propelling SBC to the No. 2 wealth manager in Asia.
• 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 the potential survivors and estates. Following a firestorm of protests from Jewish leaders as well as threats by 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, UBS (which included the old SBC) and Credit Suisse agreed to a USD $1.25-billion (CHF 1.8-billion) settlement with the claimants of the Holocaust class-action lawsuits.
• In 1997, Swiss Bank Corporation bought U.S. investment bank Dillon, Read & Co. for USD $600-million.
• In late 1997, Swiss Bank Corporation and Union Bank of Switzerland merged and adopted the new corporate name UBS AG.
• In 1999, UBS sold its international trade finance business to Standard Chartered plc for CHF 300-million.
• In 1999, UBS sold its 75% stake in precious metals refiner Argor-Heraeus to W.C. Heraeus, which already owned 25% of the UBS subsidiary.
• In 2000, UBS bought U.S. investment bank Paine Webber Group Inc. for USD $11.8-billion.
• In 2006, UBS bought the private-client business from Piper Jaffray for USD $500-million.
• Also in 2006, UBS bought Brazilian investment bank Banco Pactual for USD $2.6-billion. UBS had planned to use Pactual's platform to expand its investment bank business in Latin America. UBS paid USD $1.0-billion upfront for Banco Pactual, and agreed to pay as much as USD $1.6-billion further by 2011 if certain conditions were met. (See later entry.)
• Also in 2006, UBS bought McDonald Investments, an investment advisor with 51 branches from KeyCorp for USD $280-million.
• In 2008, UBS bought France's Caisse Centrale de Réescompte Group for Eur 387-million (USD $574-million) from Commerzbank AG. Caisse Centrale de Réescompte was an asset and wealth management firm with more than Eur 13.3-billion (USD $19.7-billion) of assets under management.
• Also in 2008, UBS sold a portfolio of distressed U.S. mortgage assets with a nominal value of USD $22-billion to BlackRock for USD $15-billion. The USD $7-billion loss had already been written down previously. As part of the agreement, UBS actually lent USD $11.25-billion to BlackRock to finance the sale, with BlackRock financing the remaining USD $3.75-billion on its own. BlackRock's investors were liable for the first USD $3.75-billion in potential losses from the portfolio. Any additional losses would be borne by UBS. UBS was essentially swapping its direct equity exposure to the sour mortgage assets for debt exposure in the form of the loan to BlackRock.
• On 2008-10-16, UBS reached an agreement with the Swiss government to raise CHF 6-billion (USD $5.28-billion, Eur 3.93-billion) of new capital, as well as unload CHF 60-billion (USD $52.8-billion, Eur 39.3-billion) of bad assets. The Swiss Confederation bought CHF 6-billion of mandatory convertible notes with a return of 12.5%. When fully exercised, the Swiss government would own 9.3% of UBS. UBS and the Swiss National Bank (SNB) also agreed to transfer CHF 60-billion of soured assets into a separate fund with CHF 6-billion of equity capital funded by UBS and a CHF 54-billion loan provided by the SNB. The interest rate on the SNB loan to UBS would be 250 basis points above the one-month LIBOR rate. SNB would be entitled to share the profits if the bad assets were eventually sold above costs.
• In late 2008, UBS sold its 1.3% stake in Bank of China for USD $808-million. UBS first acquired the stake in 2005 for USD $491-million.
• In 2009, UBS sold Brazil’s Banco Pactual to Andre Esteves, the former head of business, for USD $2.5-billion. UBS would book a small loss on the sale but would free up capital needed to restore its capital reserves following massive losses in 2008 and 2009.
• In June 2009, UBS raised CHF 3.8-billion (Eur 2.51-billion) in new capital from a common stock issuance.
• In August 2009, the Swiss government sold its CHF 6-billion investment in UBS for about CHF 5.4-billion (Eur 3.56-billion, USD $5.07-billion) one day after UBS reached an agreement with the U.S. Internal Revenue Service on releasing information on American clients suspected of tax evasion. In addition to the sale proceeds, the Swiss government also received CHF 1.8-billion in interest payments from UBS.
• In September 2011, UBS lost USD $2.3-billion (GBP 1.48-billion, CHF 2.05-billion) from unauthorized transactions by a rouge trader. The latest loss dealt a major blow to UBS' creditibility as the bank had repeatedly reassured its clients and investors that new measures had been in place to monitor and reduce its risk profile following USD $50-billion of write-downs during the credit crisis. UBS also saw its clients pulling some CHF 400-billion of funds, or 20% of the total client assets, out of the bank's accounts between 2008 and 2010.
• In October 2012, UBS announced 10,000 jobs will have been cut by 2015, mainly in the bank's London, New York and Swiss fixed-income operations.  The bank also planned to reduce its risk-weighted assets by another CHF 100-billion (USD $107-billion) to alleviate new capital requirement.  UBS will re-focus on private banking, wealth management, commercial banking, corporate advisory, foreign exchange and precious metals.
• 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 and wiped out shareholders' equity. 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 order to reduce the risk for UBS, Swiss authorities agreed to guarantee against 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.

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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.

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