UBS Group AG UBS -5.50%
is in talks to take over all or part of Credit Suisse Group AG,
CS -6.94%
which could involve government support, part of an urgent effort by Swiss and global authorities to restore confidence in the banking system, people familiar with the matter said.
Credit Suisse this week took a more than $50 billion lifeline for the Swiss National Bank’s liquidity after concerns escalated over its outlook. The action did not do enough to halt the slide in Credit Suisse shares or stem the loss of bank deposits, forcing the central bank and Switzerland’s top financial regulator to orchestrate talks with Credit Suisse’s biggest rival, UBS. .
The banks have raised a number of scenarios, including those that result in UBS taking over all or part of Credit Suisse, according to people familiar with the matter.
UBS has long been seen as part of any state-backed solution for Credit Suisse, which has a balance sheet about half the size of UBS’s $1.1 trillion in total assets. Any large-scale takeover would give UBS prized businesses within Credit Suisse, such as high-net-worth clients in Asia and the Middle East, but could come with less desirable units such as the struggling investment bank of Credit Suisse. Swiss credit. It could also derail UBS’s existing strategy and its perceived stability with investors.
UBS has a market cap of around $65 billion, compared to Credit Suisse’s $8 billion, according to FactSet.
Both banks are considered systemically important in Switzerland and globally, and a combination could be subject to additional oversight and capital charges.
The Swiss authorities should reach at least a rough agreement before the market opens on Monday. A spokesman for financial regulator Finma and the SNB declined to comment. A finance ministry spokeswoman said she would not comment on the rumours.
The talks, which were reported earlier by the Financial Times, may not result in a deal between Credit Suisse and UBS. They are the top two banks in terms of assets in Switzerland, serving savers and businesses, as well as high net worth clients around the world. Both have Wall Street investment banks and large asset management branches.
UBS may not be the only player in the mix. Other financial institutions are reviewing the situation to see if they could buy parts of Credit Suisse or make back offers, people familiar with the efforts said.
Big asset managers have long coveted some of the bank’s investment businesses, including its European and U.S. asset management real estate arms. Credit Suisse executives have repeatedly rejected these offers, arguing that asset management is at the heart of its operations.
Credit Suisse’s slide towards state aid came after other banks and major investors pulled out of doing business with the Swiss lender last week. Other investment firms stopped trading with the bank in the fall as its longstanding problems worsened, people familiar with the matter said.
Analysts are concerned that wealthy customers are withdrawing their money. Executives from other banks said they received inflows from Credit Suisse clients last week.
Using UBS to save Credit Suisse marks a turnaround from nearly 15 years ago, when Switzerland bailed out UBS after it got stuck with billions in toxic assets in its US operations. Credit Suisse refused state aid at the time and emerged from the crisis in better shape.
It was then battered by tighter financial regulation and costly settlements with regulators. The bank has undergone a series of restructurings. Credit Suisse’s latest management team, some of whom previously worked at UBS, had asked for more time to prove they could make a difference.
—Patricia Kowsmann contributed to this article.
Write to Justin Baer at justin.baer@wsj.com, Margot Patrick at margot.patrick@wsj.com and Ben Dummett at ben.dummett@wsj.com
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