UBS ends state guarantee granted over Credit Suisse rescue

ZURICH  -UBS won’t need the government guarantee it secured to rescue failing rival Credit Suisse and has repaid billions of Swiss francs in emergency loans, freeing it of taxpayer-backed funding, Switzerland’s biggest bank said on Friday.

The Swiss government provided 9 billion francs ($10.3 billion) of loss protection guarantees to UBS as part of the state-sponsored takeover of Credit Suisse earlier this year.

UBS also said it no longer needed a public liquidity backstop or a liquidity assistance loan of up to 100 billion francs from the Swiss National Bank (SNB) and backed by a federal guarantee.

“These measures, which were created under emergency law to preserve financial stability, will thus cease to exist, and the Confederation and taxpayers will no longer bear any risks arising from these guarantees,” the Swiss government said on Friday.

UBS shares were up 5 percent in early trading.

UBS also said that Credit Suisse had fully repaid an Emergency Liquidity Assistance Plus (ELA+) loan of 50 billion francs to the SNB.

As of July, a 43 billion franc emergency liquidity assistance loan with the central bank remained outstanding, a person familiar with the matter said.

The news should calm the political debate around taxpayers’ exposure to UBS, said Vontobel analyst Andreas Venditti.

“The early voluntary repayment could potentially also help in other matters, such as negotiating the retention of the Credit Suisse Swiss business, in our view,” Citi analyst Andrew Coombs said.

UBS agreed on March 19 to buy Credit Suisse for a knockdown price of 3 billion francs and up to 5 billion francs in assumed losses in a rescue orchestrated by Swiss authorities with Switzerland’s second-largest bank on the edge of collapse.

Credit Suisse and UBS also borrowed 168 billion francs from the SNB in various emergency liquidity schemes to ease the takeover.

The rescue created a Swiss banking and wealth management giant with a $1.6 trillion balance sheet and was the biggest banking deal since the 2008 financial crisis.

Government help included a guarantee of up to 9 billion francs for losses UBS might incur from the sale of Credit Suisse assets, beyond 5 billion francs that UBS agreed to cover itself.

UBS’s chief executive and chairman on Friday told staff in a memo seen by Reuters that it would provide information on further milestones it had reached in the merger with Credit Suisse alongside its second-quarter results on Aug. 31.

UBS also said that, together with Credit Suisse, it had paid over 700 million francs in fees and risk premiums for the guarantees and emergency liquidity facilities.

($1 = 0.8760 Swiss francs)