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UBS-Credit Suisse merger: How is Switzerland's 'superbank' shaping up?

AFP
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UBS-Credit Suisse merger: How is Switzerland's 'superbank' shaping up?
A signs of Swiss bank Credit Suisse is seen in Basel, on April 4th, 2023. Photo by: Fabrice COFFRINI / AFP

UBS chief executive Sergio Ermotti shed light Tuesday on how Switzerland's biggest bank will go about integrating Credit Suisse once the takeover is completed in the coming months.

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On March 19th, UBS agreed to buy its stricken closest domestic rival for $3.25 billion, backed up by some hefty Swiss government guarantees.

As UBS unveiled its quarterly results, here are some of the outlines that emerged of how Ermotti sees the future banking juggernaut shaping up:

Growing wealth management

The takeover will create a superbank in charge of $5 trillion of invested assets, said Ermotti, who led UBS from 2011 to 2020 and was called back in to carry out the complex merger operation.

Achieving such a level of assets is the equivalent of "seven to 10 years of net new money" coming in, he said.

"It will make us the second-largest wealth manager in the world," he said, and "the only truly global player" in the field.

The merger is a chance to strengthen its wealth management reach, with Ermotti underlining that UBS is stronger in North America while Credit Suisse is better positioned in Southeast Asia.

READ ALSO: Swiss president says crisis rescue averted catostrophe

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The merger will also significantly strengthen UBS in South America.

Prudence

The merger will also strengthen asset management and investment banking, but Ermotti warned that "activities outside our strategic focus and risk appetite will be run down".

Investment banking and asset management were central to the scandals that crippled Credit Suisse. Its risk culture was singled out after the British financial firm Greensill went bankrupt and the US hedge fund Archegos imploded.

Newly appointed UBS CEO Sergio Ermotti speaks during a press conference in Zurich on March 29th, 2023.

Newly appointed UBS CEO Sergio Ermotti speaks during a press conference in Zurich on March 29th, 2023. (Photo by ARND WIEGMANN / AFP)

On Monday, Credit Suisse announced it was ending the complex and controversial transaction planned with US investment banker Michael Klein for restructuring its investment banking arm, thus leaving it to UBS to sort out.

Prudence is dear to Ermotti's vision.

UBS will be "maintaining our strong culture and prudent risk management", said Ermotti, who conducted a major restructuring - notably in investment banking - during his first spell at the Zurich-based institution.

Impact within Switzerland

The merger raises serious concerns about jobs and competition in Switzerland.

Ermotti urged investors to be patient, insisting that public debate within the country is currently "totally based on emotions and in many cases, totally uninformed".

He said any decisions, to be taken within the coming months, would be "based on facts".

The combined UBS and Credit Suisse workforce amounted to around 120,000 employees at the end of 2022, including 37,000 within Switzerland.

READ ALSO: Swiss government to investigate why Credit Suisse crumbled

Job cuts the 'painful' part

Ermotti said there was no immediate need for layoffs because "we still need to operate the two banks separately for the foreseeable future".

The question will arise in the longer term, and "that's the most painful part of this transaction".

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However, he intends to proceed in a transparent fashion and is partly counting on natural turnover and retirements to limit the number of job cuts.

Rebuilding customer confidence

UBS intends to complete the takeover by the end of June, and has already received the approval of the Swiss, British and US Federal Reserve authorities.

Some customers may be nervous after the implosion of Credit Suisse, but Ermotti voiced confidence that UBS will retain and win back clients.

In the first quarter of 2023, UBS's wealth management business saw inflows of $28 billion, including $7 billion during the last 10 days of March.

By Nathalie OLOF-ORS

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