UBS shares fall 8.7% at the open, after buying Credit Suisse

Shares of UBS bank fell 8.77% at the opening of the Zurich Stock Exchange after closing a deal to buy Credit Suisseits traditional rival that was at risk of bankruptcy due to an irremediable crisis of confidence.

The Swiss government offered important guarantees for this operation to take place – using certain emergency instruments – considering that the collapse of Credit Suisse could generate a financial crisis not only in the country, but globally.

However, investors this morning seem to be dissatisfied with this arrangement, through which UBS agreed to buy Credit Suisse for 3,000 million euros, a price that it will pay solely in shares and that values ​​the titles of the absorbed entity 60% below its value at the close of the trading day on Friday.

Following this logic, Credit Suisse shares lost 63.5% at the start of trading, to 0.68 cents per share, compared to 0.76 cents that UBS agreed to pay, prompted by federal authorities who wanted to have closed an agreement before the markets began the week.

The arrangement could only be closed thanks to the important guarantees that the Swiss Confederation offered to UBS in the event that this takeover generates losses or has to face eventual litigation inside or outside the country.

In addition, the Swiss National Bank made available a liquidity line to finish convincing UBS, which has solid accounts -after having carried out a fund restructuring as a condition for the public bailout from which it benefited in 2008- and for the which to stay with Credit Suisse had little economic interest.

As a result of this purchase, UBS has indicated that it is putting on hold its planned share buybacks, which it saw as a way to repay shareholders in capital, as its share price has the potential to rise.