Takeover completed, UBS can begin integration with Credit Suisse in earnest

UBS will be able to launch the integration of Credit Suisse for good after the finalization of the acquisition of its competitor on Monday. A herculean task that will be closely watched by customers, employees and Swiss political and economic leaders. "We have finalized the legal takeover of Credit Suisse," said the first bank in Switzerland in an open letter published in several newspapers. It evokes "the beginning of a new historical chapter" for the new entity. The acquisition gives birth to a megabank like Switzerland has never known. A size that worries politicians. Thousands of jobs could disappear in Switzerland alone because of duplication. On Friday, UBS boss Sergio Ermotti warned that the coming months could be "bumpy" as the integration will bring "waves" of tough decisions, particularly around jobs.

To avoid bankruptcy of the second largest bank in Switzerland, UBS agreed on March 19 to buy Credit Suisse under pressure from the authorities for 3 billion Swiss francs (an equivalent sum in euros). The second largest bank in the country had not resisted the loss of confidence in it after several huge scandals and deficient risk management. The formalization of this union opens a major project for UBS which, in the open letter, highlights its strong corporate culture and a “conservative” approach to risk while specifying that it will make “no compromise”. "UBS can start to be proactive," Andreas Venditti, financial analyst at Vontobel, told AFP last week.

UBS has stepped up preparations since mid-March and must already have an idea of ​​the businesses it wants to keep, close or sell but "was limited in what it could do" until the merger was sealed, according to the 'analyst. This merger of the two largest banks in Switzerland promises to be extremely complex technically (Credit Suisse, despite its setbacks, is an extremely sophisticated bank) but also politically.

But for Thomas Jordan, the head of the central bank, the Swiss National Bank (SNB), there was no other solution. “It is of course a shame that there is only one (big bank) left. But I am sure that if the takeover by UBS had not succeeded, there would have been an international financial crisis. It would have been much worse for Switzerland,” he explained in an interview with the weekly Sonntagszeitung published on Sunday. UBS had obtained significant guarantees from the Confederation in this takeover in order to protect itself against possible unpleasant surprises in the accounts. The terms of the takeover and the size of the juggernaut are causing serious concern in Switzerland to the point that Parliament has set up a commission of inquiry, an extremely rare occurrence.

Investors would like to know more about the integration process and the units that will be absorbed. According to Andreas Venditti, however, the answers should only begin to filter in at the end of August, when the results for the second quarter are published. He hopes that the leaders of UBS will say more about the fate of the Swiss branch of Credit Suisse, the flagship of the bank which escaped the scandals. The issue is thorny given the duplicates in terms of branches and jobs. The two giants currently have around 120,000 employees worldwide, including 37,000 in Switzerland.

Among the major challenges facing UBS, Ipek Ozkardeskaya, an analyst at Swissquote Bank, mentions in particular "talent retention" as departures multiply in the face of fears of downsizing. She also cites the creation of "a new culture within the bank", that of Credit Suisse having been totally discredited by the many scandals that have tarnished its reputation.

Regulators will also have to ensure "to protect competition, which could require possible splits" of activities, Ipek Ozkardeskaya told AFP. The Swiss Socialist Party is demanding a 'weight loss cure', fearing the merger will create a 'monster' too big to save. In the event of a crisis, the whole country would be taken "hostage", fears the left formation. To facilitate the takeover, some 259 billion francs of public liquidity were released. To give itself some time, UBS has postponed the publication of its quarterly results by more than a month, to August 31.