Thu, Aug 31st 2023
The fate of the traditional Swiss bank Credit Suisse is definitely sealed. The Swiss business of CS will also be fully integrated into UBS. Around 3,000 people will lose their jobs in this country.
Until recently, many Swiss people had hoped that the “Credit Suisse” brand could survive in some form – for example as an independent CS Switzerland. But the integration of CS Switzerland is clearly “by far” the best solution, emphasized CEO Sergio Ermotti several times to analysts and media representatives on Thursday.
His team has eight very intense weeks behind them. All possible scenarios were examined: an IPO, a complete or partial spin-off, a dual brand, a sale and, of course, full integration. In the end, the latter was the only option. “CS Switzerland would not have been able to survive on its own,” said Ermotti.
Pretty clear schedule
The integration will still take some time, but the management is moving forward quickly: Worldwide, the integration should be largely done by the end of 2026. In Germany, the merger is to be legally completed as early as 2024. After that, CS Schweiz will gradually be transferred to the UBS systems by 2025.
How many jobs will ultimately fall victim to the takeover around the world is an open question. There was speculation about 30,000 to 35,000 jobs out of a total of almost 120,000. However, the targeted annual cost savings provide an indication: by the end of 2026, USD 10 billion less should be spent than in 2022. For comparison: in 2022, Credit Suisse’s total expenses were CHF 18.2 billion.
UBS is well aware of its special responsibility in Switzerland and towards the employees in the home market, since UBS and the former CS are such immensely large employers in relation to the population. In Germany, it was decided to name the number of layoffs specifically and already today, said Ermotti, in order to give the employees clarity. That’s only fair.
3000 layoffs in Switzerland
There are said to be 3,000 layoffs in Switzerland. 1,000 layoffs due to the integration of Credit Suisse’s Swiss business, and another 2,000 layoffs in other local business areas. In the long term, however, more jobs could be saved with the integration of CS Switzerland, said Ermotti.
At the same time, according to him, another decision would not have changed the job cuts: If CS Switzerland were to be split off, for example, restructuring with around 600 layoffs would also have been necessary.
Ermotti brushed aside fears that the new UBS would be too big. He sees no competition law problems for the new megabank in Switzerland. “The competition remains tough,” he said. The cantonal banks together would continue to have the largest market share. Measured by the number of branches, the banking group made up of UBS and CS is only number three.
Battle for market share begins
Despite all the restructuring and careful implementation of the integration, UBS must not neglect its operational business. Further investments in technology must not be neglected either. UBS also wants to “do everything possible” to defend its market share in Switzerland. You want to lose as little of the cake as possible, says Ermotti. However, you have to be realistic. Some customers are likely to want to diversify after the merger.
The story is far from over with today’s announcements. UBS management already announced further details on the strategy when the results for the third quarter were published at the beginning of November, as well as a detailed update at the beginning of February 2024 on the occasion of the annual figures for 2023.
Very confident in the medium term
Initially, however, the banking group as a whole – including the acquired Credit Suisse – achieved an absolute record profit in the second quarter: Since the purchase price for the former second-largest Swiss bank was well below the book value, UBS was able to post billions of euros in so-called negative “goodwill”. The bottom line is that the new UBS Group made a net profit of USD 28.9 billion. The pre-tax profit adjusted for takeover effects at group level is estimated at 1.1 billion.
Meanwhile, business at Credit Suisse has stabilized in strategically important asset management, it said. The outflows could be stopped, on the contrary, funds can be attracted again. For the current third quarter, UBS is assuming that adjusted pre-tax earnings can be achieved for the entire business. UBS has also already presented medium-term targets with a view to profitability and the cost/income ratio.
Investors seem to be convinced. In the early afternoon, the shares rose 5.6 percent to CHF 23.40 and thus cost as much as last time in 2008. With an increase of almost 30 percent this year, the shares also left the other SMI values far behind.
Keystone/SDA©
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