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UBS faces decisive hurdles in CS integration

Updated at 15 Mar 2024 10:20 am

UBS is making rapid progress with the integration of Credit Suisse. The legal mergers are now imminent. After that, the restructuring of CS and the reduction of divisions and employees should really get underway.

According to the official timetable, the integration will take until the end of 2026, but the management under new CEO Sergio Ermotti is forging ahead. According to Ermotti & Co, the first of three phases has already been completed: This mainly involved the strategic plans and stabilizing Credit Suisse's struggling business. The bank should also become profitable again, at least on an adjusted level - i.e. without the restructuring costs - which has been achieved.

The rapid pace of integration is also reflected in the cost savings already achieved and the reduction in the number of employees. By the end of 2023, UBS had reduced its annual costs by around USD 4 billion compared to the combined result of the two big banks in the 2022 financial year. This means that by the end of the year, around 30 percent of the targeted USD 13 billion had already been achieved by the end of 2026.

Legal merger in the second quarter

In terms of employees, there were already around 10,000 fewer full-time positions at the end of 2023. After UBS had around 73,000 employees at the end of 2022 and CS around 50,000 - i.e. a total of around 123,000 - the latest figure was just under 113,000. It remains to be seen how many jobs will fall victim to the merger at UBS worldwide. There is speculation about 30,000 to 35,000 jobs.

In Switzerland alone, 3000 redundancies are expected. 1000 of these relate to the integration of CS Switzerland into the banking group and a further 2000 to other CS business units in Switzerland, as Ermotti announced at the end of August.

Almost three years to go

Even though significant steps have already been taken towards integration, it is clear that there is still a lot to do. The second phase, which is now underway, is all about restructuring and optimizing the combined business. Probably the most important upcoming milestone is the merger of the still separately managed legal entities, UBS AG and Credit Suisse AG. This should be completed by the middle of the year.

According to UBS's plans, the merger of the local country organizations UBS Switzerland AG and Credit Suisse (Schweiz) AG will then take place in the third quarter of 2024, with CS Switzerland to be gradually transferred to the UBS systems by 2025.

These are the decisive steps for the management to then press ahead with further restructuring. For example, UBS wants to exit loss-making and/or excessively risky business areas. CS's trading business in particular is to be massively downsized.

In terms of costs, for example, this means that the annual cost base is to be reduced by a further 2 billion dollars this year (after the 4 billion in 2023), then by 4 billion in 2025 and by the last 3 of the total planned 13 billion in 2026.

Sustainable growth from 2027

The merger of the Swiss units of UBS and CS will also have a visible impact on the local branch network. The closure of numerous branches is probably already a done deal. There are currently around 190 UBS branches and around 95 CS branches in Switzerland, i.e. a total of around 285. As UBS boss Ermotti recently said, there should ultimately be around the same number as UBS had before the CS takeover. In other words, up to 100 branches could be closed in Switzerland alone.

After the complete integration and restructuring of the business - i.e. from 2027 - UBS no longer wants to be primarily concerned with itself or with downsizing and restructuring measures, but also wants to grow again. There is talk of "sustainable growth" and "attractive returns".

©Keystone/SDA

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