UBS CEO Sergio Ermotti is taking the most radical step since the emergency takeover of Credit Suisse in March: the major bank UBS is also integrating the Swiss business of the smaller bank. Credit Suisse will thus completely disappear as an independent institute. “Full integration is the best solution for UBS, our stakeholders and the Swiss economy,” said Ermotti. Politicians and the general Swiss public had hoped for a spin-off from CS Switzerland, for example via an IPO, to ensure competition and avoid a concentration of risk for the small country.
Another, similarly radical step: UBS is laying off around 3,000 employees in Switzerland as part of the takeover. About 1,000 layoffs were due to the integration of Credit Suisse’s Swiss business into UBS, Ermotti said at an analysts’ conference. In addition, the need to radically restructure other parts of Credit Suisse will lead to around 2,000 additional layoffs in Switzerland. These measures would be implemented over the coming years. Employees are the largest cost pool at banks.
UBS recently raised its savings target again. By the end of 2026, the major bank wants to reduce costs by more than ten billion dollars. So far, the world’s second-largest asset manager for wealthy private customers had targeted around eight billion dollars. “Since we announced the completion of the Credit Suisse acquisition two and a half months ago, we have been working flat out to implement the largest and most complex banking merger in history to the benefit of all stakeholders,” said Ermotti. The integration-related expenses are likely to be largely offset by value-added effects of around twelve billion dollars.
The core business with millionaires and billionaires is doing surprisingly well
The first major digital bank run in history forced the Swiss government to act in March. She orchestrated a takeover of Credit Suisse by UBS practically overnight. This was able to stop the massive outflow of customer money. Nevertheless, customers withdrew another CHF 39.2 billion from Credit Suisse in the quarter. The bottom line was a net loss of CHF 9.3 billion in the second quarter.
UBS representatives indicated that Credit Suisse would have had a difficult time in the home market in the future. In the end, full integration was the only option.
In view of the comparatively high and stable profits, CS Switzerland was considered the crown jewel of Credit Suisse, with analysts estimating the value at up to 16 billion francs. UBS bought all of Credit Suisse for only three billion Swiss francs and thus a fraction of the equity. The corresponding book profit from the transaction ensured that the group brought in a record profit of 29 (previous year’s period 2.1) billion dollars in the second quarter. The core business with millionaires and billionaires did surprisingly well; in the so-called Global Wealth Management, UBS collected 16 billion francs in new money, the best value in a second quarter for more than ten years. In July and August, the combined wealth management business of UBS and CS raised $8 billion.
Ermotti is on a roll
Experts had previously expected that the Credit Suisse integration could also affect its own business. In such cases, employees often care more about securing their own position than about the customers. Rich and super-rich who had accounts with both institutions in the past could also be tempted to broaden their banking relationships again.
But CEO Ermotti, who was brought back to UBS specifically for the Credit Suisse integration, is on a roll. The mammoth project has been going according to plan so far, and he was able to tick off several important legal cases at the same time. The greatest success was probably the recent waiver of a state safety net with a total volume of up to 209 billion francs. The bank has thus gained a great deal of freedom of action in relation to politicians. This probably made it easier for Ermotti to bury Credit Suisse, which was founded in 1856 by entrepreneur Alfred Escher as a Swiss credit institution. At the same time, investors appreciate that UBS has the risks associated with Credit Suisse under control and therefore no longer needs the state guarantees. UBS shares are up 30% since the acquisition was announced and are just below their highest level since 2008.