UBS completes Credit Suisse takeover to become wealth management
behemoth
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[June 12, 2023] By
Noele Illien
ZURICH (Reuters) -UBS on Monday said it had completed its emergency
takeover of embattled local rival Credit Suisse, creating a giant Swiss
bank with a balance sheet of $1.6 trillion and greater muscle in wealth
management.
Announcing the biggest banking deal since the 2008 global financial
crisis, UBS Chief Executive Sergio Ermotti and Chairman Colm Kelleher
said it would create challenges but also "many opportunities" for
clients, employees, shareholders, and Switzerland.
The group will oversee $5 trillion of assets, giving UBS a leading
position in key markets it would otherwise have needed years to grow in
size and reach. The merger also brings to an end Credit Suisse's
167-year history, marred in recent years by scandals and losses.
Credit Suisse shares were up 0.4% on their last day of trading, while
UBS were also up around 0.4% in mid-day trade.
The two banks jointly employ 120,000 worldwide, although UBS has already
said it will be cutting jobs to reduce costs and take advantage of
synergies.
UBS announced a string of management changes including at Credit Suisse
AG, which is now a subsidiary that will be run separately.
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Of the more than 160 leaders who are being confirmed or appointed today
at UBS, over a fifth are joining from Credit Suisse, a spokesperson for
UBS said.
Andre Helfenstein, head of Credit Suisse's domestic business, will
remain in his role. UBS, has said it is considering all strategic
options for the unit.
CLOSING RUSH
UBS agreed on March 19 to buy the lender for a knockdown price of 3
billion Swiss francs ($3.32 billion) and up to five billion francs in
assumed losses in a rescue Swiss authorities orchestrated to prevent a
collapse in customer confidence from pushing Switzerland's no. 2 bank
over the edge.
On Friday, UBS finalised an agreement on the conditions of a 9 billion
Swiss franc ($10 billion) public backstop for losses from winding down
parts of Credit Suisse's business.
UBS sealed the takeover in less than three months - a tight timetable
given its scale and complexity - in a race to provide greater certainty
for Credit Suisse clients and employees, and stave off departures.
MYTHS DEBUNKED
However, the deal, which saw the state bankroll the rescue, exposed two
myths - namely, that Switzerland was entirely predictable and that
banks' problems would not rebound on the taxpayers.
"It was supposed to be the end of too-big-to-fail and state-led
bailout," said Jean Dermine, professor of banking and finance at INSEAD,
adding that the episode showed this central reform after the global
financial crisis had not worked.
The rescue also showed that even big global banks are vulnerable to
bouts of bank panic, said Arturo Bris, professor of finance and director
of the IMD World Competitiveness Center.
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![](../images/061223PIX/busine91.jpg)
Buildings of Swiss banks UBS and Credit
Suisse are seen on the Paradeplatz in Zurich, Switzerland, March 20,
2023. REUTERS/Denis Balibouse/File Photo
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What's more, the disappearance of Credit Suisse's investment bank,
which UBS has said it will seek to cut back significantly, marks yet
another retreat of a European lender from securities trading, which
is now largely dominated by U.S. firms.
Since the global financial crisis, many banks have pared back their
global ambitions in response to tougher regulations.
Swiss regulator, FINMA, which came under fire for its handling of
the downfall of the country's second-largest bank, said one of the
most pressing goals for the newly merged bank was to quickly reduce
the risk of the former Credit Suisse investment bank.
UBS is set to book a massive profit in second-quarter results after
buying Credit Suisse for a fraction of its so-called fair value.
Ermotti has, however, warned the coming months will be "bumpy" as
UBS gets on with absorbing Credit Suisse, a process UBS has said
will take three to five years.
Presenting the first snapshot of the new group's finances last
month, UBS underscored the high stakes involved, by flagging tens of
billions of dollars of potential costs - and benefits, but also
uncertainty surrounding those numbers.
NEXT CHALLENGE
Possibly the first challenge for Ermotti, brought back to steer the
merger, will be a politically fraught decision about the future of
Credit Suisse's "crown jewel" - the bank's domestic business.
Bringing it into UBS's fold and combining the two banks' largely
overlapping networks could produce significant savings and Ermotti
has indicated that as a base scenario.
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But he will need to weigh that against public pressure to preserve
Credit Suisse's domestic business with its own brand, identity and,
critically, workforce.
Analysts say public concerns the new bank will be too big - with a
balance sheet roughly double the size of the Swiss economy - means
UBS might need to tread carefully to avoid being exposed to even
tougher regulation and capital requirements that its new scale would
call for.
They also warn that uncertainty inevitably caused by a takeover of
such scale can leave UBS struggling to retain staff and customers
and that it remained an open question whether the deal can deliver
value for shareholders in the long run.
($1 = 0.9030 Swiss francs)
(Reporting by Noele Illien; Additional reporting by John O'Donnell
and John RevillEditing by Miranda Murray, Tomasz Janowski, Edwina
Gibbs and Sharon Singleton)
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