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The UBS-Credit Suisse merger: Helvetia’s gift
Prof. Dr. Pascal Böni from Swiss Nexia member firm Remaco Group, in association with Tilburg School of Economics and Management, Université de Neuchâtel and London Business School, has co-authored an insightful research paper on the Credit Suisse – UBS merger which took place in March 2023.
Research Abstract:
“The UBS- Credit Suisse (CS) merger in March 2023, one of the biggest banking unions in history, was an emergency rescue deal engineered by Swiss authorities to avoid more market-shaking turmoil in global banking. The merger resulted in a significant increase in the combined stakeholder net wealth, totalling 22.8 billion US dollars.
This increase was distributed around the merger announcement through abnormal returns to UBS stockholders (7.95%) and CS bondholders (34.74%), equivalent to approximately 5.1 billion and 18.8 billion US dollars, respectively. In contrast, CS stockholders experienced negative abnormal stockholder returns of -55% (-1.1 billion USD) while the UBS bonds’ value was not impacted by the merger.
We infer that UBS stockholders received a wealth transfer from CS stockholders and that this transfer is likely explained by unusual restrictions on the number of bidders for CS. The observed effects on bondholders’ wealth align with previous research on coinsurance and the implications of “too-big-to-fail” research findings.
We conclude that the combined wealth effect, which cannot be attributed to the short-term abnormal returns on securities of the two banks, is externally driven. It appears to come at the expense of taxpayers: the merger-bailout has increased Switzerland’s sovereign credit risk, resulting in an expected 6 to 7 billion US dollars in additional debt costs for the country.”
- Click this link to read the full paper: here
- Find an adapted blog-style version of the research here: here
*First published on SSRN.com on 26 June 2023
If you would like to discuss any of the issues raised in this article, please contact:
Prof. Dr. Pascal Böni
CEO / Partner
Remaco Advisory Services AG
Switzerland
E : pascal.boeni@remaco.com
T : +41 61 319 51 51
W : www.remaco.com
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