Analysts at JPMorgan Chase & Co have said that the difficulties currently being faced by Credit Suisse could most likely end in a takeover of the Swiss bank.
Bloomberg reported that analysts led by Kian Abouhossein laid out three scenarios for Credit Suisse’s future, with the most probable being an acquisition by UBS Group AG. The analysts said:
- Credit Suisse’s capital position isn’t an issue, but the situation is about ongoing market confidence issues with its IB strategy and ongoing franchise erosion,” Abouhossein wrote in a note saying status quo is no longer an option.”
Abouhossein has been wary about Credit Suisse, rating the shares either neutral or underweight for almost two years. He warned last month that the bank was deteriorating faster than expected, and the shares have fallen 26% since then.
Meanwhile, spokespersons at Credit Suisse and UBS declined to comment on this probability.
More on the three scenarios: JPMorgan Analysts listed scenarios for Credit Suisse to include a takeover, likely by UBS. Given the market concentration between the pair, a takeover would possibly be followed by a listing or spinoff of the Swiss Bank, worth 10 billion Swiss francs.
Secondly, the Swiss National Bank stepped in with a full deposit guarantee or injecting equity. That would give Credit Suisse time to restructure but it would be highly dilutive for existing shareholders.
Thirdly, a self-help approach with the closure of the investment bank which according to them may not be enough to reduce market concerns.
A tie-up with UBS was one option discussed in talks between Credit Suisse and Swiss authorities about how to stabilize the bank, according to people familiar with the matter. UBS CEO Ralph Hamers on Wednesday declined to answer any hypothetical questions about Credit Suisse. In a memo to staff on Thursday, Credit Suisse CEO Ulrich Koerner said the bank would continue to focus on its turnaround plan.
Major restructuring: Analysts at KBW also backed the view that Credit Suisse is heading for a major restructuring. They wrote that a break-up is the most likely outcome, with further asset sales to simplify the bank.
In contrast, analysts at Bank of America Corp. said the support from the Swiss National Bank is a clear message it will continue in its current form. The bank is one of just two firms tracked by Bloomberg that rate Credit Suisse a buy.