Credit suisse collapse explained in hindi || Latest update on UBS takeover and lifeline provided

What led to Credit Suisse’s downfall?

Credit Suisse (CS) had a lot going for it:

✅ A banker to the world’s ultra-rich

✅ The 2nd largest of its kind in Switzerland, behind UBS

✅ One of just 30 “Global Systemically Important Banks”

✅ Boasted a 167 year old legacy

✅ Had a highly liquid balance sheet

✅ Received a $54 billion infusion from the Swiss National Bank to back it up

✅ Didn’t have a concentrated client base or interest rate risk problem like Silicon Valley Bank or Silvergate Bank

So, while UBS may now have taken over its reins, how did the 167 year old Swiss lender capitulate in the first place?

There’s two parts to it, one reputational and the other financial, but first let’s go over some events that preceded CS’ downfall:

❌ Lent loosely to a family office, called Archegos Capital, which was making high-risk bets that imploded, dealing a $5.5 billion loss to CS

❌ Nudged clients to invest with Greensill Capital, which subsequently collapsed, freezing $10 billion of CS’ clients’ funds

❌ Took a $600 million hit from a fraud charge in a Bermuda court

❌ Reached a $475 million settlement for a corruption case involving tuna bonds in Mozambique

❌ Faced a $2 million fine due to a conviction in a Bulgarian money laundering scandal

❌ Got wrapped up in a spying scandal involving its then CEO and former wealth management chief

❌ Suffered a massive client data leak, exposing its wealthy but discrete clientele to unwanted scrutiny

❌ Got exposed for “material weakness” in its financial reporting, resulting in a shareholder lawsuit

With CS taking one hit after another, its reputation, over time, was in tatters, and when people no longer trusted its brand, an exodus ensued:

🚪Clients walked out the door in droves

🚪The top management became somewhat of a revolving door in itself

🚪It became hard to recruit / retain the top talent in general

🚪Its biggest shareholder, The Saudi National Bank - SNB, refused to commit further funds

Naturally, CS’ missteps and the erosion of trust in its brand came with a financial cost:

💸 Over $100 billion in client assets evaporated in just Q4 2022

💸 In recent times, CS witnessed around $10 billion in deposit outflows on a daily basis

💸 The cost to insure its debt via CDS soared through the roof, reaching levels associated with distress

💸 Bondholders of debt due in 2026 took a 30% haircut, at 70 cents on the dollar

💸 Altogether, these troubles led to CS posting an $8 billion loss in FY22 alone, equal to its recent market cap

💸 CS’ share price fell off a cliff, declining by 90% over 5 years

Do you think UBS will benefit from this saga or will it simply be left holding the bag?