UBS set for ‘bumpy’ integration of Credit Suisse

ZURICH: UBS is poised to complete on Monday its takeover of Credit Suisse, but integrating the former rival is a Herculean task that clients, employees and Swiss political leaders will closely watch.

The coming months are likely to be “bumpy,” warned UBS chief Sergio Ermotti on Friday, adding the integration will come with “waves” of difficult decisions, particularly regarding employment.

NOT SMOOTH Two men sit under a sign of Credit Suisse displayed on a building in Lugano on June 9, 2023. UBS is set to finalize the takeover of Credit Suisse on Monday, June 12, 2023, but the hardest part is yet to come: turning the arranged marriage of Switzerland’s biggest banks into a success. AFP PHOTO

The country’s leading bank UBS was forced into a marriage to prevent its rival from going under, but it hasn’t waited for Monday to start preparing to absorb Credit Suisse.

But “from Monday onward, UBS can start to be proactive,” Andreas Venditti, a financial analyst for Vontobel, told Agence France-Presse (AFP), if the timetable stands.

UBS has been preparing since mid-March and already has an idea of what it wants to keep, close or sell, but “so far they are limited in what they could do” until the merger was sealed, Venditti said.

The merger of Switzerland’s two biggest banks will be complex both technically and politically, resulting in a megabank unlike the Swiss have ever seen a size that has political leaders worried.

Thousands of jobs could be lost due to duplication.

But according to Thomas Jordan, chairman of the Swiss National Bank, there wasn’t another solution.

“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,” he said Sunday in an interview with the weekly Sonntagszeitung.

Credit Suisse risked collapse when its share prices plunged more than 30 percent during trading on March 15, after three US regional lenders folded.

The Swiss government, the central bank and financial regulators stepped in and strong-armed UBS into a $3.25-billion takeover announced on March 19.

The deal includes guarantees for UBS in case there are any nasty surprises in the Credit Suisse cupboards.

UBS and the Swiss government signed the guarantee contract on Friday, which can reach up to 9 billion Swiss francs ($9.85 billion), if the losses exceed 5 billion francs.

Many questions surrounding the merger remain unanswered, but Venditti said the picture should be clearer after second-quarter financial results emerge.

UBS has pushed the publication date back by more than a month to August 31.

Ipek Ozkardeskaya, an analyst at Swissquote Bank, said “talent retention” would be one of the biggest challenges, as staff departures multiply in the face of downsizing fears.

From the political standpoint, the financial regulators Finma “should make sure to protect competition, which could necessitate an eventual spin-off of certain business units,” Ozkardeskaya told AFP.

The government and the central bank released about 259 billion Swiss francs of liquidity to facilitate the takeover.

“We owe it to the youth of this country to ensure that such a crisis cannot happen again,” Damien Cottier, the parliamentary leader of the center-right Liberals party, said in the National Council lower chamber on Wednesday.