5377730933_64fd363fbd_b

UBS leads wealth management after merger


UBS has successfully completed its emergency acquisition of struggling Swiss rival Credit Suisse, forming a mammoth bank with a balance sheet worth $1.6 trillion. The deal, announced as the largest in the banking sector since the 2008 global financial crisis, is expected to present both challenges and opportunities for clients, employees, shareholders, and Switzerland as a whole, according to UBS CEO Sergio Ermotti and Chairman Colm Kelleher. The merger gives UBS control over $5 trillion in assets, granting it a leading position in key markets that would have taken years to establish independently. Additionally, the acquisition brings an end to Credit Suisse’s 167-year history, marred by recent scandals and losses.

Credit Suisse, once valued at over 82 Swiss francs ($90.11) per share in 2007, experienced a steep decline in recent years, with shares closing at less than one franc ($1.10) on the day of the acquisition. While Credit Suisse shares closed up about one percent, UBS shares also saw an increase of approximately 0.8 percent. The combined workforce of the two banks totals 120,000 employees worldwide, although UBS has already announced plans for job cuts to streamline operations and capitalize on synergies. UBS has also implemented management changes, including at Credit Suisse AG, which will function as a separate subsidiary.

UBS’s acquisition of Credit Suisse was agreed upon in March at a reduced price of 3 billion Swiss francs ($3.3 billion), with UBS also assuming up to 5 billion francs ($5.5 billion) in losses. This rescue deal, orchestrated by Swiss authorities to prevent a collapse in customer confidence, was finalized by UBS within three months. The timely completion aims to provide certainty to Credit Suisse’s clients and employees and prevent mass departures. The agreement also debunked the notion that Switzerland was entirely predictable and that banks’ problems would not impact taxpayers. Notably, the disappearance of Credit Suisse’s investment bank signifies another retreat of European lenders from securities trading, leaving dominance in the hands of US firms.

While UBS is set to report significant profits in the second quarter after acquiring Credit Suisse at a fraction of its fair value, CEO Sergio Ermotti has cautioned that the integration process will face challenges in the coming months. The absorption of Credit Suisse is expected to take three to five years. One pressing decision for UBS is the future of Credit Suisse’s domestic business, known as its “crown jewel.” Although merging it with UBS could result in substantial cost savings, public pressure to preserve the business’s brand, identity, and workforce may influence the outcome. Analysts warn that UBS’s increased size, with a balance sheet roughly twice the size of the Swiss economy, could expose it to tougher regulation and capital requirements. Furthermore, the success and long-term value for shareholders remain uncertain due to the inevitable uncertainties associated with such a large-scale takeover.

Pan Finance is a print journal and news website providing worldwide intelligence on finance, economics and global commerce. Known for our in-depth analysis and opinion pieces from esteemed academics and celebrated professionals; our readership consists of senior decision makers from across the globe.

Contact us