
UBS has finalized the legal acquisition of its prior Swiss competitor Credit Suisse. The accord for the $3.2 billion deal was reached in March due to concerns that Credit Suisse's losses would adversely affect the stability of the banking sector. The expanded UBS now commands a balance sheet of $1.6 trillion and a staff of 120,000.
On Monday, UBS declared that it had officially completed the takeover of its competitor Credit Suisse. Sergio Ermotti, the newly-reinstated CEO of UBS Group, said in a statement that the two firms would be joining together rather than contending with one another. Additionally, in an open letter, the bank leaders made clear that they were not going to compromise UBS's "strong culture" or "conservative risk approach." The downfall of Credit Suisse was largely due to multiple risk management failures. Ermotti underscored in an interview with CNBC's "Squawk Box" that the amalgamated bank - now the 21st largest in the world - would be more adept at serving clients. He also mentioned that it was vital to ensure that UBS did not return to its previous blunders. For the near future, UBS Group will handle UBS and Credit Suisse as self-sufficient banks. Questions remain with regard to assets including Credit Suisse's renowned retail bank.
At the completion of Credit Suisse's acquisition by UBS, its American Depositary Shares will be removed from the SIX Swiss Exchange and New York Stock Exchange, and shareholders will get one UBS share for every 22.48 Credit Suisse shares they possess. The merged UBS will boast a balance sheet worth $1.6 trillion and 120,000 employees. Ermotti cautioned that there won't be any instant career openings for all individuals, as synergies are part of the story. UBS will report its initial consolidated results on August 31. Monday, UBS declared that it anticipated "Credit Suisse operating losses and significant restructuring charges" to be cancelled out while it eliminates risk-weighted assets, plus it forecast a common equity tier 1 capital ratio of roughly 14% for the rest of the year.
In a memo obtained by CNBC, the bank declared that a number of senior Credit Suisse employees plan to part ways with the company, including Chief Financial Officer Dixit Joshi who was appointed in October and the CEO for Asia Pacific region, Edwin Low.Simon Grimwood, Credit Suisse's Head of Tax and Finance Change, will succeed Joshi as CFO. He has been overseeing the integration process since March.Former Credit Suisse Co-head of Markets Michael Ebert will take on the post of Head of the Credit Suisse Investment Bank and Head of Americas at UBS Investment Bank. Jake Scrivens will replace Markus Diethelm as Credit Suisse's General Counsel, while Global Head of Operations Isabelle Hennebelle will join the board in her current role.When asked if he was worried about the potential departure of the talent pool, Ermotti stated: "We are always regretful to watch proficient individuals exiting, in other scenarios people acknowledged what was likely to be our imminent restructuring and chose to move on."He noted that the bank has been successful in hiring external personnel following the merger announcement.Ermotti was named in March to resume his post as UBS' top leader in order to supervise the transformation. He had occupied the position from November 2011 to October 2020, managing the consequences of the 2008 financial crisis and a $2.3 billion deficit resulting from the London rogue trader debacle. UBS Chair Colm Kelleher remarked that he underwent a "transformation" of the bank with cost reductions as well as cultural adjustments.
The $3.2 billion takeover was the culmination of a chaotic weekend in March, when fears arose that Credit Suisse's major losses would destabilize the banking system. With the help of Swiss regulators, the Swiss government has agreed to cover up to $10 billion in losses after UBS takes on the first $5 billion as part of the transaction. This deal involves the forfeiture of the $17 billion worth of Credit Suisse's AT1 bond holders. Despite this, Beat Wittmann of Porta Advisors praised the quickness and efficiency of UBS's actions. He does, however, recognize the various challenges that the bank still faces such as the integration of both banking models and the potential impact of upcoming Swiss elections. Additionally, Wittman urged caution due to the tense macro environment rife with higher interest rates and credit crunches. Ermotti, in response to reports of UBS implementing “red lines” for Credit Suisse bankers, noted that these are merely their processes and operating model being applied to Credit Suisse, not meant to be discriminatory.
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