UBS (UBSG.S) said on Monday it had completed its emergency takeover of embattled local rival Credit Suisse (CSGN.S), creating a giant Swiss bank with a balance sheet of $1.6 trillion and more significant muscle in wealth management. The $3.3 billion deal, arranged hastily in March by the government and regulators after Credit Suisse’s shares plunged and jittery depositors pulled out their money, was designed to stem upheaval in global financial markets.
The merger gives the combined group control of $5 trillion in assets, boosting its presence in key markets that would have taken years to achieve if it continued operating as separate entities. The new UBS will be Switzerland’s largest financial institution and the world’s biggest wealth manager.
In Ermotti, the UBS board has tapped a veteran who steered the Swiss banking group for nine years by slashing thousands of investment-banking jobs and placing a focus on wealth management. Analysts say he is expected to steer the merged bank through a delicate process of integrating Credit Suisse, which will likely result in a reduced investment-banking footprint.
But he also faces the challenge of navigating the somewhat forced marriage with a bank that its share of scandals and losses has hurt. Its 169-year history includes a spying scandal under previous CEO Tidjane Thiam and multi-billion losses from failed investments like Archegos Capital Management in 2021.
“This is the start of a new chapter – for UBS, Switzerland as a financial center and the global financial industry,” UBS Chief Executive Sergio Ermotti and Chairman Colm Kelleher said in an open letter published in Swiss newspapers on Monday. They urged employees of the two banks to unite “as a single team, united in purpose and in our determination to succeed.”
The pair pledged that “we are committed to preserving the independence and culture of the bank.” They also outlined a list of restrictions on how Credit Suisse can spend its remaining cash, including on acquisitions and laying off staff.
They said the restrictions minimize risk and ensure a “stable, profitable and stable” business. UBS said it had already made several changes to improve its profitability and reduce costs to maximize the value of the takeover.
The merger was not subject to shareholder approval, and the bank did not disclose how much government-backed funds would be drawn down. The bank has already spent around 3.3 billion Swiss francs on various costs associated with the deal. Those include fees to the Swiss National Bank and the federal ministry of Finance and insurance premiums on any money drawn down. The government will also receive a share of the merged bank’s profits in return for its backing. That will help offset the loss of tax revenue from the merger. The Swiss government’s stake is about one-third of the combined company.