UBS Group AG yesterday said that it had finalized the takeover of its former rival Credit Suisse Group AG, clearing the way for a Herculean task of integration that would be closely watched by clients, employees and Swiss political leaders.
The coming months are likely to be “bumpy,” UBS chief executive Sergio Ermotti had said on Friday, saying the government-orchestrated operation would require “waves” of difficult decisions, particularly regarding employment.
“We have finalized the legal takeover of Credit Suisse,” the bank said in an open letter published in the NZZ newspaper, calling it “the beginning of a historic new chapter.”
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UBS, the country’s leading bank, was forced into the marriage to prevent its rival from going under — with potentially catastrophic consequences for the global financial system — but it had not waited for yesterday’s announcement to start preparing to absorb Credit Suisse.
“From Monday onward, UBS can start to be proactive,” Vontobel AG analyst Andreas Venditti said told reporters.
UBS has been preparing since the middle of March and already has an idea of what it wants to keep, close or sell, but had been “limited in what they could do” until the merger was sealed, Venditti said.
The merger of Switzerland’s two biggest banks would be complex 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 because of overlapping operations.
However, Swiss National Bank Chairman Thomas Jordan said there was no other 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 on 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 US$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 (US$9.85 billion), if the losses exceed SF5 billion.
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 Aug. 31.
Swissquote Bank analyst Ipek Ozkardeskaya 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 regulator FINMA “should make sure to protect competition, which could necessitate an eventual spin-off of certain business units,” she said.
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