Shares of UBS Group saw a significant increase on Friday, reaching levels not seen since the collapse of Silicon Valley Bank in March. This surge came after the news that UBS had terminated its agreement with the Swiss government to cover potential losses from its acquisition of Credit Suisse.
At 0738 GMT, UBS shares rose by 4.2% to CHF20.22, briefly peaking at CHF20.54. This surpasses the CHF20.19 level that the stock closed at on March 8, just before the turbulence at SVB emerged and impacted the financial sector on both sides of the Atlantic. This crisis of confidence ultimately led to UBS taking over Credit Suisse.
The Swiss banking giant confirmed that its CHF9 billion loss-protection agreement with the Swiss government and the CHF100 billion public-liquidity backstop from the central bank, supported by the government, which were put in place before the completion of the Credit Suisse deal in June, have been voluntarily terminated.
UBS stated that it decided to end these agreements after carefully considering an evaluation of Credit Suisse's noncore assets, which were covered by the agreement, as well as evaluating the funding situation of Credit Suisse entities and the group as a whole. UBS ultimately concluded that it no longer required the assistance.
Citi analysts noted that this termination will enable UBS to save on future fees. However, they emphasized that what is even more important is the reassurance it provides regarding the health of Credit Suisse's noncore portfolio.
In addition, Credit Suisse has repaid its emergency liquidity assistance loan of CHF50 billion to the Swiss National Bank as of Thursday, according to UBS. The SNB had provided this assistance during the peak of the banking crisis in March, at a time when investor confidence was rapidly deteriorating prior to Credit Suisse's acquisition by UBS.