UBS says it was rushed into unwanted Credit Suisse rescue merger

HONG KONG, May 17 (Reuters) – UBS Group AG ( UBSG.S ) was rushed to buy cross-town rival Credit Suisse Group AG ( CSGN.S ) in a deal it did not want, as a global banking crisis worsened the latter’s economy and prompted authorities to take swift action, a regulatory filing showed.

UBS told investors in a Tuesday filing with the US Securities and Exchange Commission that it had less than four days to conduct due diligence given the “emergency.”[ads1];

It estimated a hit of around $17 billion from the takeover.

Switzerland’s biggest bank agreed to buy its smaller rival after the latter had endured a difficult year.

Credit Suisse’s involvement in a series of corporate collapses spooked customers who began withdrawing their money, a trend that accelerated as US bank failures sparked fears of a wider banking crisis.

The wave of deposit outflows and a large drop in share prices prompted the Swiss central bank on March 15 to offer Credit Suisse liquidity assistance.

The following day, UBS and Credit Suisse signed a confidentiality agreement under which the former began due diligence, the UBS archive showed.

On March 19, the Swiss National Bank announced that UBS would buy Credit Suisse for 3 billion Swiss francs ($3.4 billion) in shares and assume a loss of as much as 5 billion francs as a result of winding down parts of the business.

The final price was raised from an initial 1 billion francs, the filing showed.

Interest from UBS in buying Credit Suisse began in October when the ad hoc strategy committee of the board reviewed its rival’s plight, according to the filing.

At the time, Credit Suisse saw deposits and net assets at levels that significantly exceeded rates in the July-September quarter, UBS said.

At the beginning of December, UBS management made a preliminary assessment of the consequences of a Credit Suisse purchase, which they presented to the Strategy Committee on 19 December.

In February, the strategy committee and board separately concluded that a takeover was “not desirable” and recommended further analysis to prepare for a scenario in which Credit Suisse was in such difficulty that regulators could ask UBS to step in.

UBS said it carried out financial analysis from January to mid-March and considered potential legal structures and possible measures to address concerns, as well as any negative consequences for itself, in case the authorities proposed a takeover.

From December to mid-January, Credit Suisse executives had also discussed with the government the options, including a merger with UBS, UBS filings showed.

Reporting by Kane Wu; Editing by Sumeet Chatterjee and Christopher Cushing

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