12-6-2023 (ZURICH) UBS is on the brink of completing its acquisition of Credit Suisse on Monday (Jun 12), marking a significant milestone in the consolidation of two major Swiss banks. However, the integration process is expected to be an arduous task, closely monitored by clients, employees, and Swiss political leaders.
UBS CEO, Sergio Ermotti, cautioned that the coming months would be “bumpy,” emphasizing that the integration would entail difficult decisions, particularly concerning employment. The leading Swiss bank was compelled to merge with its rival to prevent the latter from collapsing. However, UBS has already commenced preparations to absorb Credit Suisse ahead of Monday’s completion.
Financial analyst Andreas Venditti from Vontobel stated, “From Monday onward, UBS can start to be proactive,” assuming the timetable remains unchanged. UBS has been making preparations since mid-March and has already formulated its plans regarding what to retain, close, or sell. However, Venditti noted that their actions were limited until the merger was formally sealed.
The merger of Switzerland’s two largest banks will be a complex process, both technically and politically, resulting in the creation of a mega-bank unlike anything previously seen in Switzerland. The sheer scale of the merged entity has raised concerns among political leaders.
The duplication of roles and functions between the two banks could lead to the loss of thousands of jobs. However, according to Thomas Jordan, chairman of the Swiss National Bank, there was no alternative solution. He stated in an interview with the weekly Sonntagszeitung, “Of course, it’s a pity there is only one (big bank) left. But I am sure that if the takeover by UBS hadn’t succeeded, there would have been an international financial crisis.”
Credit Suisse faced the risk of collapse when its share prices plummeted by over 30% during trading on March 15, triggered by the folding of three US regional lenders. The Swiss government, central bank, and financial regulators intervened and pressured UBS into a US$3.25 billion takeover, announced on March 19. The deal includes guarantees for UBS in the event of any unforeseen negative surprises from Credit Suisse.
The guarantee contract, which can amount to up to nine billion Swiss francs (US$9.85 billion) if losses exceed five billion francs, was signed between UBS and the Swiss government on Friday. Many unanswered questions surrounding the merger still linger, but Venditti believes that the situation will become clearer with the release of second-quarter financial results, which UBS has postponed to August 31.
Ipek Ozkardeskaya, an analyst at Swissquote Bank, highlighted that one of the biggest challenges will be retaining talent as fears of downsizing prompt staff departures. From a political perspective, financial regulator FINMA will need to ensure competition protection, potentially requiring the spin-off of certain business units, according to Ozkardeskaya.
The Swiss government and central bank have released approximately 259 billion Swiss francs in liquidity to facilitate the takeover. Damien Cottier, the parliamentary leader of the centre-right Liberals party, stressed the importance of preventing such a crisis from recurring, stating in the National Council lower chamber, “We owe it to the youth of this country to ensure that such a crisis cannot happen again.”
