UBS completes takeover of Credit Suisse – banking giant is born
UBS has completed the world’s most significant bank takeover since the financial crisis. According to an open letter published in several newspapers on Monday, the major Swiss bank completed the takeover of its ailing rival Credit Suisse, which was only announced in March. “Today we reach an important milestone,” it said in the printed letter. “We have completed the legal process of taking over Credit Suisse.” UBS had promised that the takeover of the competitor would be sealed on June 12.
The merger will create the world’s second-largest wealth manager for the rich and super-rich. The new UBS has assets under management of over five trillion dollars and around 120,000 employees. However, it shouldn’t stay that way. Experts expect that UBS will cut thousands of jobs in order to reduce duplication and save. Years of integration work await CEO Sergio Ermotti, who was brought back to the wheel especially for this task.
The forced marriage was initiated around ten weeks ago, when the Swiss government pushed the ailing Credit Suisse into the arms of the larger UBS. Since then, UBS has obtained approvals from regulators around the world for the CHF 3 billion transaction and has agreed with the Swiss government on the details of government guarantees for potential losses from the CHF 9 billion transaction.
Ermotti announced the management of the combined company about a month ago. Surprisingly for many, the former head of the bank, Ulrich Körner, is the only former Credit Suisse manager to sit on the 16-strong committee. He did not succeed in preventing the 167-year-old institute from going under. Experts expect that decisions about managers in the second and third hierarchical levels will soon be made.
The most important upcoming strategic decision relates to Credit Suisse’s Swiss business. From the start, UBS favored full integration of the division. But this plan caused criticism in Swiss politics as well as in the broader public. In addition to extensive job cuts, the critics also fear a restriction of competition. Ermotti is in the process of examining alternatives such as a spin-off of the business. The criteria are the needs of customers, the extent of the job cuts and the impact on shareholders, he said on Friday. UBS is under time pressure. “We must come up with an answer before the end of summer.”
Credit Suisse accumulated a loss of CHF 7.3 billion in 2022, partly because income fell well short of costs. A series of failures and scandals eroded customers’ trust in the traditional company. To end a bank run, the Swiss government orchestrated an emergency takeover by UBS.
The government and UBS never tire of emphasizing that this is a private-sector solution. However, to secure the transaction, the Swiss National Bank and the government have provided over CHF 200 billion in liquidity support and guarantees. Many Swiss politicians are angry that after UBS, the state had to step in again only 15 years later during the financial crisis in order to save the second major bank from collapsing. There are also fears that a rescue of the new UBS, which has a balance sheet that is around twice as large as the annual Swiss economic output, could exceed the country’s resources.