Berliner Boersenzeitung - UBS to absorb Credit Suisse domestic unit, eyes 3,000 job cuts

Switzerland's largest bank, which was strongarmed into a $3.25-billion takeover of its closest domestic rival in March to keep it from going under, said it aimed to complete most of the integration by the end of 2026, with more than $10 billion in cost savings by then.

"Two and a half months since closing the Credit Suisse acquisition, we are wasting no time in delivering value for all our stakeholders from one of the biggest and most complex bank mergers in history," UBS chief executive Sergio Ermotti said.

The announcement came as UBS posted its second-quarter income statement, presenting its first results since the mega-merger that rocked Swiss banking was finalised in June.

Analysts described the picture painted as positive, while investors also seemed enthused, sending UBS's share price soaring by almost five percent to open at 23.25 Swiss francs ($26.4).

The results were strong for UBS, which posted a towering net profit of $29.2 billion. Credit Suisse took a $10.1 billion loss over the same period.

- 'Full integration' -

Credit Suisse had been plagued by scandals prior to the takeover, which was precipitated by fears that a crisis in regional US banks would cross the Atlantic.

Investors and employees alike have been particularly eager for any clues as to the fate of Credit Suisse's Swiss division, which was the unit that best withstood the multiple crises wracking the bank.

But questions have been rife over whether it could continue to operate independently due to the significant overlap with UBS's business in Switzerland.

The answer was no.

"Our analysis clearly shows that full integration is the best outcome for UBS, our stakeholders and the Swiss economy," Ermotti said.

"Our goal is to make the transition for clients as smooth as possible," he said.

"The two Swiss entities will operate separately until their planned legal integration for 2024 with the gradual migration of clients onto UBS systems expected to be completed in 2025."

Until then at least, UBS said it would maintain all of Credit Suisse's extensive sponsorship of sporting and other events and causes in Switzerland.

- Job cuts 'unavoidable' -

Speaking to analysts after the announcement, Ermotti acknowledged that the plan would lead to significant layoffs, but stressed that "cuts were unavoidable regardless of the selected scenario".

The decision to integrate Credit Suisse's business would result in "around 1,000 redundancies", he said, adding that the overall restructuring was "expected to lead to about 2,000 additional redundancies in Switzerland over the next couple of years".

Ermotti stressed that UBS was "committed to minimising the impact on employees", and would provide financial support and retraining opportunities to those affected.

They would also benefit from "a quite healthy Swiss job market", he said.

- Credit Suisse suffers $10 bn loss -

Ermotti also emphasised to analysts that UBS's analysis of Credit Suisse's business showed "the necessity of the decisive actions taken over the weekend" in March when Swiss authorities forced through the merger.

"It was not just a matter of liquidity drying up. Credit Suisse's business model, and business ... was deeply flawed, and its reputation severely damaged," he said.

"The bank was no longer in a position to continue on its own."

Even before the results were released, it was obvious the merger combined two banks pulling in diametrically different directions.

While Credit Suisse in recent years has been racking up towering losses, posting a massive 7.3-billion Swiss franc ($8.3 billion) net loss in 2022, UBS reported a $7.6 billion net profit.

And Thursday's announcement showed that Credit Suisse's woes had continued to pile up, with the former second largest bank in Switzerland showing a pre-tax loss of 8.9 billion Swiss francs ($10.1 billion) in the second quarter.

UBS meanwhile has continued to project strength, announcing earlier this month that it does not need the billions in support offered by the Swiss government and the central bank to go through with the takeover.

But its $29.2-billion profit in the second quarter was heavily distorted by the gigantic takeover, which brought with it a string of exceptional items, and was not comparable with the year-ago quarter.

(K.Lüdke--BBZ)