A 167-Year-Old Bank’s Chapter Closed with a Momentous Agreement: The Story of a Historic Deal

SKA, which later turned into “Credit Suisse”, and from the first page in July 1856 until the last page in March 2023, it went through a long journey of nearly a century and a half (167 years to be exact), during which the bank managed to become one of the most important banks in the world. The world, according to the classification of the Financial Stability Board (an international body that monitors the global financial system).

In this chronology, “Sky News Arabia Economy” reviews the most important milestones in the history of “Credit Suisse”, after it finally closed its page, following its acquisition by “UBS” in a historic deal worth three billion Swiss francs ($3.25 billion):

• 14 years after its opening, specifically in the year 1870, the bank opened its first foreign representative office in New York. In 1876 he moved to a new headquarters in Zurich, and later opened his first branch outside the same city in Basel, after acquiring the Oberrheinische Bank.

From what began as a Swiss investment bank, Credit Suisse has grown into a success story spanning more than a century and a half, gradually evolving into a leading global provider of financial services.

Mergers and acquisitions

Throughout its history, the bank has witnessed a variety of large mergers and acquisitions, as well as a series of crises and “scandals” as well.

• In 1939 the Swiss American Company was established to focus on the underwriting and investment business, by the bank.
• The bank acquired White Weld & Co. AG from the American investment bank White Weld, and renamed it Claridine Finances AG, in 1962.
• The bank, SKA, was licensed to operate as a universal service bank in New York, in 1964.
• In 1982 SKA became the first Swiss bank to have a seat on the New York Stock Exchange. CS Holding was also established as a shareholder in companies operating in the industrial sector.
• In 1988, Credit Suisse acquired 44 percent of First Boston (a huge New York investment bank founded in 1932).
• First Boston operated as an independent investment bank under the name CS First Boston until 2006
• In 1989 CS Holding became the first parent company of the SKA Group. In the same year when the bond market collapsed, leaving First Boston unable to recover hundreds of millions of dollars, Credit Suisse bailed out a controlling stake in 1990.
• In the same year, the group bought the Swiss private bank Lowe Bank.

Among the deals the bank also recorded was the acquisition of Volksbank (the fourth largest bank in Switzerland in 1993), and in the following year Credit Suisse acquired Neue Aargauer Bank.

SKA also underwent a restructuring process in 1997, whereby CS Holding was transformed into the Credit Suisse group, and the SKA name has since been abolished.

In the same year, the group bought the Winterthur insurance company (before selling it later in 2006 to the French insurance company AXA).

• In 1999, the group under its new name “Credit Suisse” continued its acquisitions, and acquired Pincus & Co. Asset Management, and acquired Donaldson & Lufkin and Degenerate the following year.
• Between 2002 and 2004, the group witnessed two restructurings, which resulted in the inclusion of Credit Suisse Financial Services, Credit Suisse First Boston and Winterthur.
• In 2005 CS First Boston was fully integrated into Credit Suisse (and in 2022 Credit Suisse revived the “First Boston” brand as part of an effort to expand the business).

The global financial crisis

During the global financial crisis (2007-2008), Credit Suisse managed to survive, without needing a government bailout plan unlike its competitor UBS, which fate wanted to acquire later in 2023 after Credit Suisse faced a crisis that posed a great threat to the banking sector around the world.

The company’s deals followed after the global financial crisis, including the purchase of Morgan Stanley in 2013, and after two years the group witnessed a new restructuring process led by CEO Tidjan Thiam.

One of the controversial stations in the group’s history was in the year 2022, linked to a bank espionage scandal that resulted in the departure of its former CEO, Thiam, from the group.

• In March 2022, the group incurred losses of $5.5 billion due to the collapse of the US investment fund Archegos. In the same month, Credit Suisse was forced to freeze $10 billion in supply chain funds linked to the bankrupt British financial firm Greensill (a crisis that marked the beginning of the bank’s setback).
• In October 2022, the group announced a comprehensive strategic plan for restructuring, among its most important items (increasing capital by four billion dollars, and reducing the number of employees by about nine thousand employees until the end of 2025).
• Last November, the Saudi National Bank invested 5.5 billion riyals, or 9.88 percent, in Credit Suisse, as part of its participation in the capital increase process.

fundamental weaknesses

Credit Suisse has gone through two years of scandals that, by management’s own admission, revealed “fundamental weaknesses” in its “internal controls”. The market watchdog accused him of “grossly breaching his prudential obligations” over the Greensill Financial bankruptcy, which marked the beginning of his setbacks.

The bank faced a sharp selling wave after the head of the National Bank of Saudi Arabia said, in statements reported by international news agencies this year, that it would not be possible to give the Swiss bank more liquidity because the ownership stake in it could not exceed 10 percent due to regulatory rules.

The bank witnessed massive withdrawals of funds by its clients, including in the wealth management sector, which was one of the activities that the bank intended to refocus on as part of a major restructuring plan.

And last Sunday, Swiss President Alain Berset announced the acquisition of the giant UBS Bank of its smaller competitor, Credit Suisse, in an attempt to avoid further turmoil that shook the global banking services market.

• The value of the deal was three billion Swiss francs ($3.25 billion).
• UBS’ acquisition of Credit Suisse came at a price less than half of the latter’s value of 7.4 billion francs at the close of Friday’s trading.
• Under the terms of the deal, Credit Suisse shareholders will receive one UBS share for every 22.48 Credit Suisse shares held.
• The deal included the provision by the Swiss National Bank of 100 billion francs of liquidity assistance to UBS, in addition to a government guarantee of 9 billion francs for potential losses of assets.
• According to the Swiss regulator, about CHF16 billion of Credit Suisse bonds will be rendered worthless, in order to ensure that private investors bear the costs.

Thus, the page of the “Credit Suisse” group, which began in 1856 and over the course of 167 years, was turned, during which it was a landmark in the banking sector around the world.

breakdown factors

About that end, the executive director of vi markets in Cairo, Ahmed Moati, says in exclusive statements to “Sky News Arabia Economy” that the crisis of the “Credit Suisse” group has been cumulative for years, specifically since 2016 in particular, but it has become more inflated. With all the recent crises in the banking sector, after the collapse of the Silicon Valley Bank in the United States of America.

He refers to the banking espionage crisis that the bank faced, which sparked a wide uproar within the group, and other crises such as the Archegos hedge fund crisis, as well as the crisis resulting from the British financial bankruptcy of Greensell. Contributed to a wave of large withdrawals to the bank from depositors amounting to about 110 billion Swiss francs.

At the same time, Maati talks about the bank’s impact on the collapse of “Silicon Valley” as well, given that “Credit Suisse” suffers mainly from problems and crises that undermine the confidence of depositors and investors, and therefore with the collapse of “Silicon Valley” and the fears that gripped the markets, this accelerated the depositors’ withdrawal of their money. .

The executive director of Vi Markets in Cairo refers to the impact of monetary policies in Europe (and interest-raising measures) and their repercussions on banks, explaining that these policies accelerated the “Credit Suisse” crisis, especially in light of the leniency in laws and conditions with banks, which is a double-edged sword. , which led to the collapse of Silicon Valley.