“All options on the table”
UBS does not rule out partial sale of Credit Suisse
04/05/2023, 5:15 p.m
The major Swiss bank UBS has had to take over the crisis-ridden Credit Suisse on the instructions of politicians. Quite a few are now worried about the competitive situation. UBS is trying to appease. A new head of the bank should also calm things down – an old acquaintance is coming back.
The major Swiss bank UBS has tried to allay concerns about the dominance of the new mega-bank in the home market after the emergency takeover of Credit Suisse. “There is enough competition in Switzerland with around 250 banks,” explained Lukas Gähwiler, Vice President of the Board of Directors, at the UBS shareholders’ meeting. Nevertheless, 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 overall interests of Switzerland.
Politicians, large parts of the Swiss public and economists fear that the market power of the new institute could restrict competition. They are also worried that Switzerland may not have the strength to intervene to save the new mega-bank if it gets into trouble. “We are concerned about the new banking giant,” said the director of voting rights advisor Ethos. He called for a spin-off of the Swiss business to be examined in one to two years.
Chairman of the Board of Directors Colm Kelleher explained that the transaction had to be completed first. This could take a few months. In addition, Credit Suisse must be stabilized. Gähwiler warned against too high expectations of a possible separation from the business. “A spin-off could be difficult and financially less attractive than commonly thought.” He referred to the complex IT architecture, the high need for refinancing and the lack of international connections. The bank also sees a lot of potential in the business. “But: We at UBS will approach and analyze all options with an open mind.”
Ex-boss takes over again at UBS
However, the owners are not allowed to comment on the mega takeover at the general meeting, nor are the Credit Suisse shareholders at their meeting on Tuesday. The deal was enforced with emergency law. The Swiss government arranged a forced marriage between the two major banks in mid-March after a rush of customers brought Credit Suisse to the brink of insolvency. This is the first merger of two globally systemically important banks, explained Kelleher. “The execution is anything but easy and involves enormous risk.” The integration should take three to four years, he explained.
Kelleher wants to entrust this Herculean task to a new helmsman. Instead of the Dutch retail banker Ralph Hamers, the trained investment banker Sergio Ermotti will lead UBS from Thursday. The 62-year-old had fundamentally restructured UBS during his earlier nine-year tenure and, above all, reduced risky investment banking. Even then, he had entertained the idea of a major takeover.
The fact that Credit Suisse is now getting to this point goes back to a long series of failures and scandals that made the 167-year-old traditional bank the number one problem child of European financial institutions. In the last financial year alone, the bank suffered a loss of CHF 7.3 billion. UBS, on the other hand, had its best result in 16 years at $7.63 billion in 2022.
Investors appreciated the deal. Since the announcement, UBS shares have gained 8%, outperforming the European banking sector. UBS gets CS for only three billion Swiss francs, and the Swiss state also assumes part of the risk of the deal.