'A signal for all bankers...,' says Uday Kotak as UBS seals Credit Suisse takeover
2 min read . Updated: 20 Mar 2023, 12:50 PM IST
Premium- Uday Kotak said that Credit Suisse's sale to UBS at a discount of 60 per cent along with a write-off of $17 billion worth AT1 bonds is a signal for all bankers and stakeholders as to what happens when the risk-return matrix is overtaken by obsession with size
Veteran banker and the managing director of Kotak Mahindra Bank, Uday Kotak, on Monday tweeted his "signal for all bankers and stakeholders" following the takeover of Credit Suisse Group AG by UBS Group AG.
The Kotak Mahindra Bank CEO said the Credit Suisse saga highlighted the importance of risk-return assessment in investments over the size of a financial institution.
In a tweet, the billionaire wrote, “Credit Suisse sold to UBS for 3 bn $. 60%discount to stock value at Friday closing. ~600 bn $ balance sheet sold for 3 bn $ equity value. 17 bn $ of AT1 bonds written off. A signal for all bankers and stakeholders, when risk return matrix is overtaken by obsession with size."
UBS to buy Credit Suisse in $3.3 bn deal
UBS agreed to buy Credit Suisse in a historic, government-brokered deal aimed at containing a crisis of confidence that had started to spread across global financial markets.
The Swiss bank is paying $3.2 billion for its rival in an all-share deal that includes extensive government guarantees and liquidity provisions. The price per share marked a 99 per cent decline from Credit Suisse’s peak in 2007.
The Swiss National Bank is offering a 100 billion-franc liquidity assistance to UBS while the government is granting a 9 billion-franc guarantee for potential losses from assets UBS is taking over.
Regulator Finma said about 16 billion francs of Credit Suisse bonds, known as AT1s, will become worthless to ensure private investors help shoulder the costs.
Speaking to broadcaster SRF, UBS Chief Executive Ralph Hamers said that UBS can handle the risks from taking over Swiss rival bank Credit Suisse.
Hamers, who will lead the combined entity as chief executive, said UBS would be able to manage the risks that could emerge from a so-called superbank.
"We have a very good capital ratio at UBS, and we also have a very good liquidity position. So we have contained the risks in the markets," Hamers said in the interview broadcast early on Monday.
"The second step for us is to transform CS's investment bank into an investment bank like UBS has. We call this a capital-light investment bank. In doing so, we are not taking so much risk."
He said he did not currently have any figures regarding lay-offs at Credit Suisse, although there would always be cost savings.
Still, there were no definite plans at present, he said.
"There are certainly opportunities and chances for growth. The many employees - CS has 50,000 worldwide - also have a new future together with us. And together we can build an even more beautiful bank."
The intended takeover would bring security and stability to the Swiss financial market and also for Credit Suisse clients, he added.
"The takeover means that we are bringing back stability and security for CS clients," Hamers said. "But also that we are upholding the reputation of the Swiss financial centre."
With agency inputs