UBS completes acquisition of Credit Suisse

Takeover ends 167-year history of smaller rival and creates world's biggest wealth manager

Swiss bank UBS will oversee more than $5 trillion in assets. Reuters
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UBS has completed its $3.2 billion takeover of smaller rival Credit Suisse to become Switzerland's largest lender and the world's biggest wealth manager with a balance sheet of $1.6 trillion.

The closure of the deal, which was reached in March, was announced in an open letter in local Swiss newspapers.

As part of the closure, Credit Suisse's shares and American Depositary Shares (ADS) have been delisted from the Six Swiss Exchange and the New York Stock Exchange.

Credit Suisse shareholders will receive one UBS share for every 22.48 outstanding shares held. The exchange of Credit Suisse ADS may be subject to certain fees.

Credit Suisse’s obligations under its outstanding debt securities will be assumed by UBS.

On June 9, UBS and the Swiss government signed a loss-protection agreement (LPA) as part of the merger of the two lenders.

Under the pact, the Swiss government will cover losses of up to 9 billion Swiss francs ($10 billion).

UBS will bear 5 billion francs in potential losses realised on a designated portfolio of Credit Suisse non-core assets while the Swiss government will cover the next 9 billion francs of potential realised losses.

“UBS will manage these assets in a prudent and diligent manner and intends to minimise any losses and maximise value realisation on these assets. It also will cover the initial and ongoing external costs incurred by the confederation and [Swiss regulator] Finma for the LPA,” it said on Friday.

With the completion of the merger, UBS will manage more than $5 trillion of assets, making it one of the world's largest wealth manager.

The merged entity is expected to generate an annual run-rate of cost reductions of more than $8 billion by 2027.

UBS has said it will cut jobs to reduce costs and take advantage of synergies but has yet to indicate how many people in its 120,000 workforce globally will be laid off.

The lender could reduce its workforce by 20 per cent to 30 per cent post the merger, Swiss newspapers have reported.

“We won't be able to create short-term job opportunities for everybody. Synergies [are] part of the story,” UBS chief executive Sergio Ermotti said at an event in Switzerland earlier this month, Reuters reported.

“We need to take a serious look at the cost base of the stand-alone and combined organisations, and create a sustainable outcome … it will be painful.

“We will have a more even distribution of jobs … when the dust settles down … the best thing for our clients and shareholders and our people is to have the best people in the jobs.”

In March, Swiss regulators jumped in to ring-fence Credit Suisse by paving the way for it be absorbed by UBS, amid a crisis of confidence in the troubled lender, following the collapse of several lenders in the US.

The Swiss National Bank agreed to lend UBS up to 100 billion Swiss francs to help it take over Credit Suisse, while Finma erased $17 billion worth of Credit Suisse’s bonds and scrapped the need for shareholders to vote on the agreement.

Later that month, UBS brought back Mr Ermotti as group chief executive and president, about two years after he left the bank, to oversee the integration of Credit Suisse.

The appointment was made “in light of the new challenges and priorities facing UBS after the announcement of the acquisition”, UBS said at the time.

Mr Ermotti was the group chief executive of UBS from November 2011 to October 2020 and served as chairman of Swiss Re, one of the world's largest reinsurance companies before his reappointment to UBS.

In April, Credit Suisse reported 61.2 billion francs in outflows in the first quarter that ended its 167-year history as Switzerland's second largest lender and forced a shotgun wedding with rival UBS.

While UBS said its first-quarter net profit plunged 52 per cent, as revenue fell and legal provisions and net credit loss expenses rose, it maintained a positive momentum and attracted $28 billion in new money from wealthy clients in its global wealth management division.

Of that, $7 billion came in the last 10 days of March after the announcement of the deal to buy Credit Suisse.

It also recorded $20 billion in net new fee-generating assets in its wealth management business and $14 billion net in new money in its asset management division.

Updated: June 12, 2023, 7:27 AM