“All options are on the table”
UBS does not rule out a partial sale of Credit Suisse
The large Swiss bank UBS was forced to take over the crisis-stricken Credit Suisse on the instructions of politicians. Quite a few are now worried about the competitive situation. UBS tries to reassure. The new head of the bank should also be reassuring – an old acquaintance is returning.
Major Swiss bank UBS has sought to allay fears of a new megabank dominating the domestic market following its emergency takeover of Credit Suisse. “Switzerland has enough competition with about 250 banks,” explained Lucas Gewiler, vice president of the board of directors, at the UBS shareholders’ meeting. However, he did not rule out that Credit Suisse’s Swiss business could be sold. “All options are on the table.” The group wants to find the best solution for shareholders, customers, employees and the general interest of Switzerland.
Politicians, much of the Swiss public and economists fear that the new institute’s market power could limit competition. They also worry that Switzerland may not have the strength to step in to save the new megabank if it gets into trouble. “We are concerned about the new banking giant,” said an Ethos voting rights adviser. He called for a spin-off of the Swiss business to be considered in a year or two.
Chairman of the board Colm Kelleher explained that the deal must be completed first. This may take several months. In addition, Credit Suisse must be stabilized. Gewiler warned against too high expectations of a possible separation from the business. “Nomination can be difficult and financially less attractive than it is commonly thought.” He cited the complex IT architecture, the high need for refinancing and the lack of international connections. The bank also sees great potential in the business. “But: we at UBS will approach and analyze all options with an open mind.”
The former boss is back at the helm of UBS
However, the owners were not allowed to comment on the mega takeover at the AGM, nor were Credit Suisse shareholders at their meeting on Tuesday. The transaction was executed with an emergency. In mid-March, the Swiss government arranged a forced marriage between the two big banks after an influx of customers pushed Credit Suisse to the brink of insolvency. This is the first merger of two globally systemically important banks, Kelleher explained. “Execution is not easy at all and involves enormous risk.” The integration should take three to four years, he explained.
Kelleher wants to entrust this herculean task to the new helmsman. Experienced investment banker Sergio Ermotti will replace Dutch retail banker Ralf Hammers as UBS from Thursday. The 62-year-old chief fundamentally restructured UBS during his previous nine-year tenure and, above all, reduced risky investment banking services. Even then he was hatching the idea of a major takeover.
The fact that Credit Suisse has come this far can be attributed to a long series of failures and scandals that have made the 167-year-old traditional bank the number one problem child of European financial institutions. In the last fiscal year alone, the bank incurred losses of 7.3 billion Swiss francs. UBS, on the other hand, posted a 16-year best of $7.63 billion in 2022.
Investors appreciated the deal. UBS shares have risen 8% since the announcement, outperforming the European banking sector. UBS gets CS for just three billion Swiss francs, with the Swiss government also taking on part of the deal’s risk.