UBS completes acquisition of Credit Suisse to become wealth management behemoth

  • UBS has acquired its Credit Suisse
  • New management changes have been announced
  • Credit Suisse CFO and General Council to quit

ZURICH, June 12 (Reuters) – UBS ( UBSGS.) said on Monday it had completed an emergency takeover of troubled local rival Credit Suisse ( CSGNS ), creating a giant Swiss bank with a $1.6 trillion balance sheet and more 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 “many opportunities” for clients, employees, shareholders and Switzerland.

The group oversees $5 trillion in assets, giving UBS a leading position in key markets that would otherwise take years to grow and reach. The merger also ends Credit Suisse’s 167-year history, which has been marred by scandals and losses in recent years.

Credit Suisse shares were up 0.4% in late trading, while UBS rose 0.4% in mid-day trade.

The two banks collectively employ 120,000 staff worldwide, although UBS has already said it will cut jobs to cut costs and take advantage of synergies.

UBS announced several management changes, including Credit Suisse AG, which is now a separately operated subsidiary.

A spokeswoman for UBS said a fifth of the more than 160 leaders confirmed or appointed at UBS today join from Credit Suisse.

Andre Helfenstein, head of Credit Suisse’s domestic business, will continue in his role. UBS said it is considering all strategic options for the unit.

Closing rush

UBS agreed on March 19 to buy the lender for 3 billion Swiss francs ($3.32 billion) plus up to five billion francs in compensation. 2 over the shore.

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On Friday, UBS finalized an agreement on the terms of a 9 billion Swiss franc ($10 billion) public write-down of Credit Suisse for losses from shutting down parts of its business.

In a race to provide more certainty to Credit Suisse clients and employees and stave off departures, UBS sealed the acquisition within three months — a tight timetable given its size and complexity.

Myths are debunked

However, the deal, in which the government cashed in on the rescue, exposed two myths – namely, that Switzerland is completely predictable and that the banks’ problems will not fall back on taxpayers.

Buildings of Swiss banks UBS and Credit Suisse are seen on Paradeplatz in Zurich, Switzerland on March 20, 2023. REUTERS/Denis Balibouse/File Photo

“This is a colossal failure and should be the end of a government-led bailout,” said Jean Termain, professor of banking and finance at INSEAD. served

The recovery shows that even the biggest global banks are vulnerable to bank panics, said Arturo Bris, professor of finance and director of the IMD Center for Global Competitiveness.

What’s more, the disappearance of Credit Suisse’s investment bank, which UBS said it is seeking to significantly reduce, signals a retreat from bond trading by a European lender.

Since the global financial crisis, many banks have scaled back their global ambitions in response to tighter regulations.

The Swiss regulator, FINMA, which has been criticized for its handling of the collapse of the country’s second-largest bank, said one of the newly merged bank’s most important goals was to rapidly de-risk the former Credit Suisse investment bank.

UBS is set to post a huge profit in its second-quarter results after buying Credit Suisse for a fraction of its so-called fair value.

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However, Ermotti cautioned that the coming months will be “stable” as UBS absorbs Credit Suisse, a process UBS has said will take three to five years.

By providing the first snapshot of the new group’s finances last month, UBS underscored the high stakes by pointing to tens of billions of dollars in potential costs — and benefits — but uncertainty surrounding those numbers.

The next challenge

Ermotti’s first challenge, brought back to 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 create significant savings and Ermotti pointed to that as a fundamental scenario.

But he must weigh that against public pressure to protect Credit Suisse’s domestic business with its own brand, identity and, critically, employees.

Analysts say the new bank will be so big — with a balance sheet twice the size of the Swiss economy — that UBS will have to tread carefully to avoid being exposed to the tougher regulations and capital requirements its new benchmark calls for. .

They warn that the uncertainty that an acquisition of such scale will inevitably bring means that UBS may struggle to retain employees and clients, and whether the deal will deliver shareholder value in the long term remains an open question.

($1 = 0.9030 Swiss Francs)

Report by Noel Illion; Additional reporting by John O’Donnell and John Revill Editing by Miranda Murray, Tomasz Janowski, Edwina Gibbs and Sharon Singleton

Our Standards: Thomson Reuters Trust Principles.

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