- UBS has completed the acquisition of Credit Suisse
- New management changes announced
- CFO and General Council of Credit Suisse leave the company
ZURICH, Jun 12 (Portal) – UBS (UBSG.S) said on Monday it had completed an emergency takeover of embattled local rival Credit Suisse (CSGN.S), taking a giant Swiss bank with a balance sheet rating of 1.6 Trillions of dollars and greater clout have been created in wealth management.
UBS CEO Sergio Ermotti and CEO Colm Kelleher announced the biggest bank deal since the 2008 global financial crisis, saying it will bring challenges but also “many opportunities” for clients, employees, shareholders and Switzerland.
The group will manage $5 trillion in assets, giving UBS a leadership position in key markets that would have otherwise taken years to grow and reach. The merger also marks the end of Credit Suisse’s 167-year history, which has been marked by scandals and losses in recent years.
After peaking at more than 82 Swiss francs ($90.14) in 2007, scandal- and heavy-loss-plagued Credit Suisse tumbled to ever-lowering lows, closing at less than one franc on Monday.
Credit Suisse shares closed the most recent trading day up around 1%, while UBS shares also gained around 0.8%.
The two banks together employ 120,000 people worldwide, although UBS has previously announced that it will cut jobs to cut costs and leverage synergies.
UBS announced a number of management changes, including at Credit Suisse AG, which is now a subsidiary that is managed separately.
Of the more than 160 executives confirmed or appointed at UBS today, over a fifth will be from Credit Suisse, a UBS spokesman said.
Andre Helfenstein, Head of Domestic Business at Credit Suisse, will remain in his role. UBS has said it is reviewing all strategic options for the entity.
Final Rush
UBS on March 19 agreed to buy the lender at a minimum price of 3 billion Swiss francs ($3.32 billion) and up to 5 billion francs in assumed losses in a bailout orchestrated by Swiss authorities to prevent a collapse in customer confidence driving Switzerland’s No. 1. 2 bench over the edge.
On Friday, UBS entered into an agreement on the terms of a 9 billion Swiss franc ($10 billion) public guarantee for losses from the run-off of parts of Credit Suisse’s business.
UBS completed the acquisition in less than three months — a tight schedule given the scale and complexity — in a race to provide more security for Credit Suisse clients and employees and prevent attrition.
myths debunked
However, the deal, in which the state funded the bailout, exposed two myths: namely, that Switzerland was entirely predictable and that the banks’ problems would not trickle down to taxpayers.
Buildings of Swiss banks UBS and Credit Suisse are seen on Paradeplatz in Zurich, Switzerland, March 20, 2023. Portal/Denis Balibouse/File Photo
“It should be the end of the too-big-to-fail and state-led bailouts,” said Jean Dermine, Professor of Banking and Finance at INSEAD, adding that the episode showed this key reform after the global financial crisis did not do this worked.
The bailout also showed that even large global banks are vulnerable to bouts of banking panic, said Arturo Bris, professor of finance and director of the IMD World Competitiveness Center.
In addition, the disappearance of the Credit Suisse investment bank, which UBS says it plans to significantly reduce, marks another retreat by a European lender from securities trading, which is now largely dominated by US firms.
Since the global financial crisis, many banks have scaled back their global ambitions in response to tighter regulations.
Switzerland’s regulator FINMA, which has come under fire for its handling of the collapse of the country’s second-largest bank, said one of the newly merged bank’s most pressing goals is to quickly de-risk former investment bank Credit Suisse.
UBS looks set to post a massive gain in the second quarter after buying Credit Suisse for a fraction of its so-called fair value.
However, Ermotti has warned that the coming months will be “bumpy” as UBS moves ahead with its takeover of Credit Suisse, a process UBS says will take three to five years.
When UBS presented the first overview of the new group’s finances last month, it underscored just how high the risk is, pointing out tens of billions of dollars in potential costs and benefits, but also the uncertainty surrounding pointed out these numbers.
NEXT CHALLENGE
Possibly the first challenge for Ermotti, who will be brought back to oversee the merger, will be a politically contentious decision about the future of Credit Suisse’s “crown jewel” – the bank’s domestic business.
The integration into the UBS group and the combination of the two banks’ largely overlapping networks could result in significant savings, and Ermotti has cited this as the base case.
But he must balance this against public pressure to keep Credit Suisse’s domestic business with its own brand, identity and, most importantly, its workforce.
Analysts say public fears that the new bank will be too big — with a balance sheet about twice the size of the Swiss economy — mean that UBS may need to tread carefully to avoid facing even tougher regulatory and capital requirements be, which would require their new size.
They also warn that the uncertainty inherent in an acquisition of this magnitude can mean UBS struggles to retain employees and clients, leaving open the question of whether the deal can add value for shareholders over the long term .
($1 = 0.9030 Swiss Francs)
($1 = 0.9097 Swiss francs)
Reporting by Noele Illien; Additional reporting by John O’Donnell and John Revill. Edited by Miranda Murray, Tomasz Janowski, Edwina Gibbs and Sharon Singleton
Our standards: The Trust Principles.