Shares in Credit Suisse dropped 61.95 per cent in premarket trading in Zurich on Monday after rival UBS agreed at the weekend to take over the 167-year-old bank for $3 billion.
Credit Suisse shares were quoted at 0.61 Swiss francs ($0.6578) in Julius Baer premarket trading, while those in UBS were down 4.73 per cent at 15.81 francs.
"The next few hours of trading will give us a better picture on whether the crisis is contained," Ipek Ozkardeskaya, a senior analyst at Swissquote Bank, said.
"In theory, there is no reason for the Credit Suisse crisis to extend, as what triggered the last quake for Credit Suisse was a confidence crisis – which doesn't concern UBS — a bank outside of the turmoil, with, in addition, ample liquidity and guarantee from the SNB and the government." SNB refers to the Swiss National Bank.
In a package orchestrated by Swiss regulators on Sunday, UBS will pay 3 billion Swiss francs ($3.23 billion) for 167-year-old Credit Suisse and assume up to $5.4 billion in losses.
Swiss president Alain Berset called the announcement “one of great breadth for the stability of international finance. An uncontrolled collapse of Credit Suisse would lead to incalculable consequences for the country and the international financial system.”
Credit Suisse is designated by the Financial Stability Board, an international body that monitors the global financial system, as one of the world’s globally systemic important banks.
This means regulators believe its uncontrolled failure would lead to ripples throughout the financial system not unlike the collapse of Lehman Brothers 15 years ago.
