UBS is now 'the world's safest bank' for depositors because Switzerland has made it too big to fail, analyst says (2024)

• UBS' takeover of Credit Suisse for $3.2 billion makes it a depositor safe haven, Jaret Seiberg said.
• "The Swiss authorities have told everybody that this thing is too big to fail," he told CNBC.
• Unlimited deposit insurance is the "final act" to restore bank confidence but may not be needed yet, he added.

UBS has become depositors' most secure bet, TD Cowen's Jaret Seiberg told CNBC, after it agreed to take over Credit Suisse on Sunday.

The bank is set to acquire its Swiss counterpart in a $3.2 billion acquisition deal. The government-backed arrangement is an attempt to settle investors' anxiety, after Credit Suisse couldn't stem deposit outflows amid uncertainty about its liquidity and debt holdings.

"I think right now UBS has to be the world's safest bank," Seiberg said Monday, referring to its depositors. "The Swiss authorities have told everybody that this thing is too big to fail."

Together, UBS and Credit Suisse will share around $5 trillion in assets. US-listed shares of UBS were up nearly 4% on Monday. Meanwhile, Credit Suisse stock continued to tumble, diving by over 60% as terms of the all-stock takeover entailed a near-wipeout for shareholders.

The news also comes alongside another bank acquisition over the weekend: Signature Bank, one of the two regional lenders seized by the Federal Deposit Insurance Corp. over a week ago, had also found a buyer.

The third-largest bank failure after Silicon Valley Bank before it, Signature will now be in the hands of Flagstar Bank, which acquired all of its deposits and branches, as well as some of its loans.

The deal comes after the FDIC said it will guarantee all deposits at Signature and SVB, even those that exceed its $250,000 limit.

But Treasury Secretary Janet Yellen acknowledged to Congress on Thursday that, unlike SVB and Signature Bank, not all deposits exceeding the $250,000 limit will be guaranteed in the future.

For now, bank profits and net interest margins remain healthy, Seiberg said, and unlimited deposit backstops represent more of a "break the glass emergency option."

"What we really have is a crisis of confidence," he added. "Unlimited deposit insurance is the final act to restore confidence, but I'm not sure it's needed today."