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

By AFP

Banking giant UBS said Thursday it plans to fully absorb Credit Suisse's century-old Swiss division and slash thousands of jobs across Switzerland, as it seeks to redress its recently-swallowed rival.

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.

UBS posted a towering net profit of $29.2 billion, although it was heavily distorted by the gigantic takeover, which brought with it a string of exceptional items, and was not comparable with the same period a year ago.

Credit Suisse took a $10.1 billion loss in the second quarter.

Analysts described the picture painted as positive, while investors also seemed enthused, sending UBS's share price jumping nearly five percent in midday trading to 23.24 Swiss francs ($26.40).

- '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 had 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.

After initially analysing seven different options for the unit, Ermotti told analysts the outcome was "crystal clear: full integration is by far the best choice".

UBS said the two Swiss entities would continue operating 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 cultural activities in Switzerland, which include deals with the Swiss national football team and tennis great Roger Federer.

- Layoffs 'unavoidable' -

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

Speaking to journalists, he highlighted the "very favourable job market conditions in Switzerland", insisting that those affected "will be able to find another job".

The Swiss Bank Employees Association (SBEA) hailed UBS for assuming its social responsibility, but lamented an "end of an era".

"It is a sad day for the employees of Credit Suisse, who have shown great loyalty," spokeswoman Claudine Esseiva told AFP.

- Credit Suisse was 'deeply flawed' -

Ermotti also emphasised 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 told analysts.

"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.

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.