Wed, Apr 26th 2023
In the ten days after the Swiss government announced the shotgun merger of the country’s two largest banks – UBS and Credit Suisse – about CHF6.2 billion of CS’s cash exited for UBS accounts.
Even before the merger was announced, clients could see the writing on the wall when it came to flailing Credit Suisse. From all over the world, bank clients moved their assets over to UBS. In the first quarter alone, UBS received an influx of more than CHF25 billion. About CHF7 billion came from Swiss clients, CHF4.5 billion from the Asia-Pacific region, CHF3.6 billion from the Americas, and another CHF2.7 billion from Europe, Africa and the Middle East.
Despite the massive inflows, UBS profits have seen about 50% of their growth in the first quarter of 2023 compared to Q1 of 2022, bank officials announced this week. The bank reported $1 billion in profits for 2023’s Q1. In 2022’s Q1, the bank saw $2.1 billion in profits. Over the course of 2022, UBS made a net profit of $7.6 billion.
Credit Suisse saw CHF61 billion exit its accounts in the first quarter of 2023 – a staggering figure considering that it lost CHF110 billion in the last quarter of 2022. In addition, the numbers show that not all money that left CS went directly into UBS.
“These outflows have moderated but have not yet reversed as of April 24, 2023,” CS said this week, adding that most of the outflows was from its wealth management division. The Q1 report is likely to be the last for the 167-year-old bank.
The lack of trust in CS as a financial institution has been so damaged, that it “could well remain a drag on UBS operating results unless a deeper restructuring plan is announced,” Keefe Bruyette & Woods’ financial analyst Thomas Hallett said in a note to clients.
And while CS limps along before its ultimate absorption, UBS officials have yet to announce “Day 1” of the merger.
UBS must first gain the approval of regulatory authorities in Switzerland and abroad before it can officially declare the merger.
The U.S. Federal Reserve and U.K. authorities have already signed off, as well as Swiss authority FINMA. UBS still needs approval from the U.S. Securities and Exchange Commission (SEC) and clearance from the antitrust division of the EU. On Monday the waiting period under the competition and consumer protection authority expired, paving the way for UBS to make the sale final.
According to newly appointed UBS CEO Sergio Ermotti, UBS will save about CHF5.5 billion in personnel costs by 2027 as part of the CS acquisition with about 12,000 job cuts proposed in Switzerland alone. In a call with press Tuesday, Ermotti said “this will be the most painful part of the transaction.”
Ermotti stressed that the distribution of pink slips would be done “respectfully and transparently,” with the most talented CS employees given opportunities to stay.
While Ermotti refused to reveal further plans on the merger, he did underscore that rumors and speculation should not be taken seriously.
“There are a lot of voices on the merger right now, and not all of them are well informed,” Ermotti said. Stay tuned for more.
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