Credit Suisse meets to weigh options, under pressure to merge with UBS

March 18 (Reuters) – Credit Suisse Group AG (CSGN.S) embarked on an all-or-nothing weekend after some rivals became cautious in their dealings with the bank as regulators urged the bank to pursue a deal with Swiss rival UBS AG (UBSG. S).

Credit Suisse Chief Financial Officer Dixit Joshi and his teams will hold meetings over the weekend to review strategic scenarios for the bank, experts said Friday.

The 167-year-old bank is the biggest name caught up in the market turmoil unleashed by the collapse of US lenders Silicon Valley Bank and Signature Bank last week, forcing the Swiss bank to raise $54 billion in funding from the central bank.

Swiss regulators are encouraging UBS and Credit Suisse to merge, but neither bank wanted to, a source said. The regulators do not have the power to enforce the merger, the person said.

The boards of directors of UBS and Credit Suisse were expected to meet separately this weekend, according to the Financial Times.

Credit Suisse shares rose 9% in aftermarket trading following the FT report. Credit Suisse and UBS declined to comment.

In the latest sign of mounting problems, at least four major banks, including Societe Generale SA (SOGN.PA) and Deutsche Bank AG (DBKGn.DE), have imposed restrictions on their dealings with Credit Suisse or its securities, five people with direct knowledge of the case told Reuters.

“The intervention of the Swiss central bank was a necessary step to put down the flames, but it may not be enough to restore confidence in Credit Suisse, so more measures are being discussed,” said Frederique Carrier, head of investment strategy at RBC WealthManagement.

Attempts to support Credit Suisse come as policymakers, including the European Central Bank and US President Joe Biden, sought to reassure investors and depositors that the global banking system is safe. But fears of broader problems in the sector remain.

As early as this week, major US banks provided a $30 billion bailout for smaller lender First Republic (FRC.N), as US banks collectively sought a record $153 billion in emergency liquidity from the Federal Reserve in recent days.

This reflected “funding and liquidity pressures on banks driven by a weakening of depositor confidence,” said rating agency Moody’s, which this week downgraded its outlook for the US banking system to negative.

In Washington, the focus turned to increased oversight to ensure banks – and their executives – are held accountable.

Biden called on Congress to give regulators more power over the banking industry, including by imposing higher fines, recovering funds and barring officials from failing banks.

Some Democratic lawmakers have asked regulators and the Justice Department to investigate Goldman Sachs’ (GS.N) role in the collapse of the SVB, Representative Adam Schiff’s office said.

MARKET PROBLEMS REMAIN

Bank stocks worldwide have been battered since the collapse of Silicon Valley Bank, raising questions about other weaknesses in the financial system.

Shares of US regional banks fell sharply on Friday and the S&P Banks Index (.SPXBK) tumbled 4.6%, bringing the past two-week decline to 21.5%, the worst loss in two weeks since the COVID -19 pandemic shook the markets in March 2020.

First Republic Bank ended Friday with a loss of 32.8%, bringing its loss over the last 10 sessions to more than 80%. Moody’s downgraded the bank’s credit rating after the market closed.

While support from some of the biggest names in US banking staved off First Republic’s collapse this week, revelations about its cash position and how much emergency liquidity it needed shocked investors.

SVB Financial Group filed for bankruptcy under court oversight, days after regulators took over the Silicon Valley Bank unit.

Regulators had asked banks interested in buying SVB and Signature Bank to submit bids by Friday, people familiar with the matter said.

Regulators are considering retaining ownership of securities owned by Signature and SVB to allow smaller banks to participate in auctions for the collapsed lenders, a source familiar with the matter said.

Reporting by Reuters agencies; Writing by Lincoln Feast; Edited by William Mallard

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