UBS terminates loss-protection agreement related to its takeover of Credit Suisse

UBS Group AG (NYSE: UBS) has voluntarily ended the ₣9.0 billion ($10.27 billion) agreement with the government of Switzerland that was in place to cover potential losses related to the takeover of Credit Suisse.

Beat Wittman reacts to announcements on Friday

The investment bank says it thoroughly reviewed the portfolio of its acquiree to conclude that the said loss-protection agreement was no longer necessary.

Note that the financial services behemoth terminated the ₣100 billion liquidity backstop from the Swiss National Bank as well on Friday. According to Beat Wittmann of Porta Advisors:

Termination of this backstop is perfect timing. It’s a win-win situation for UBS and Swiss politicians. Main benefit is they can announce that taxpayer is off the hook and made even money.

UBS will now pay ₣40 million to Switzerland as compensation for setting up the mechanism.

What today’s development means for UBS stock

The press release this morning revealed Credit Suisse to have repaid ₣50 billion worth of emergency liquidity assistance loan to the central bank

The bank stock is up nearly 4.0% on Friday. On CNBC’s “Street Signs Europe”, Porta Advisors’ Wittman also said today:

Stock price tells the story. It’s positive. As a result, I think UBS is very well-positioned here for further gains. It’s all up to the management in terms of execution about the upcoming investment performance.

The Swiss National Bank has also terminated, on UBS request, the credit line it issued to Credit Suisse earlier in 2023. UBS is scheduled to report its Q2 financial results on August 31^st.