What’s going on at UBS after Credit Suisse?
Here is news and controversy in Switzerland about UBS. Facts, names, numbers and in-depth analysis from Corriere del Ticino
Fibrillations in Switzerland over the integration of Credit Suisse into UBS. On the one hand it emerges that the Norwegian sovereign fund has become the largest shareholder of UBS, on the other in Zurich and the surrounding area there is fury over the 3,000 cuts to the credit institution's staff.
NORWEGIAN NEWS IN UBS
The Norwegian sovereign wealth fund has become UBS's largest shareholder. Norges Bank Investment Management, which manages the world's largest sovereign wealth fund, increased its stake in UBS to more than 5% this month, after having been a shareholder in the group for almost 20 years, the Financial Times wrote today. The financial newspaper recalls that “over the past six months, UBS executives have been under pressure to demonstrate to investors that they can successfully complete the state-orchestrated $3.4 billion bailout of former rival Credit Suisse. Many large fund managers are focused on UBS's ability to negotiate a complex integration process and how quickly it will reboot shareholder returns." The Norwegian fund, which was already one of UBS's top 10 shareholders, has overtaken US investors Dodge & Cox and BlackRock to become the largest investor, according to S&P Capital IQ. Norges Bank, FT recalls, was also one of the top 10 investors in Credit Suisse when it collapsed in March, but had sold its stake.
WHAT HAPPENS IN UBS AFTER THE INTEGRATION OF CREDIT SUISSE ACCORDING TO CORRIERE DEL TICINO ( full article here )
The complete integration of Credit Suisse into UBS was the best possible solution. This is the opinion of the Zurich State Council, which nevertheless regrets the loss of jobs. Having said that, the executive says he is confident, given the social plan and the favorable labor market context.
This last observation is also shared by the Federal Council, which in a statement claims that in its opinion there should be no significant upheavals on the labor market. Nonetheless, the executive expresses "its regret for the people affected by the layoffs".
«The Federal Council – continues the statement – notes with pleasure that an agreement has been reached between the social partners of the banking sector, UBS and CS». As for UBS's plans, according to the government "they are in line with its initial expectations". On Platform X, Federal Councilor Guy Parmelin highlights how apprenticeships are safe.
WHO CRITICIZES PAINFUL DISMISSALS
For her part, the mayor of Zurich Corine Mauch described the layoffs as "painful". Now the important thing is to implement a good social plan and UBS has a duty to do so, he argued. For Daniel Leupi, head of the municipality's finance ministry, the integration of CS into UBS represents a turning point for the financial center, but Zurich has the potential to bear any tax losses.
National councilor Thomas Aeschi (UDC/ZG), and leader of the democratic-centrist group in the federal parliament, highlighted UBS's quarterly profit of 29 billion dollars on platform competitor. The Zug native did not hold back from criticizing Federal Councilor Karin Keller-Sutter.
On the same platform, the FDP deplored the disappearance of Credit Suisse. Job cuts must be carried out in a socially acceptable way, comments the party, which has filed a motion in Parliament to ask for a new strategy for the financial center.
SP co-president and national councilor Cédric Wermuth (AG) said that what was published today only confirmed his suspicions: the main effects of the acquisition were the gigantic profits of UBS. The costs will instead be passed on to the community through the reduction of jobs. For the socialist it is now clear that what the Federal Council found turned out to be a "bad solution".
The Greens also criticized the fact that taxpayers had to take on high risks due to the bank bailout while the "gigantic profits" are now the prerogative of UBS alone. And nothing has changed regarding the enormous and unsustainable risk for the national economy represented by the new "megabank", say ecologists.
For the Central Alliance, "the fact that there are fewer job losses than feared should not be an excuse to be satisfied with this situation." The party doesn't mince words: "the collapse of Credit Suisse is unacceptable." It has put jobs, the economy and the reputation of Switzerland at risk, is highlighted on the X platform.
WHAT THE FINMA SAYS ABOUT UBS
The Federal Financial Market Supervisory Authority (Finma) intends to strengthen the control of the new UBS, created after the acquisition of Credit Suisse (CS): no fewer than 22 officials will be directly responsible for supervising the banking giant, a higher number and with greater resources than was previously foreseen for the checks of the two individual institutes.
Added to this, as usual, are Finma's broad and specialized transversal functions, a communications officer explained to the AWP agency today. Furthermore, auditing firms will also be activated. Finma will supervise the large bank resulting from the merger "very intensively", the spokesperson said. UBS will have to comply with supervisory requirements «in every constellation».
The authority, however, did not take a position on the decision of the institute led by Sergio Ermotti to fully integrate CS's Swiss activities. “Finma does not comment on the strategic decisions of the parties subject to supervision,” said the press officer. However, as usual in these situations, Finma was informed of the decision in advance.
As is known, Finma did not play a secondary role in the acquisition orchestrated by the Federal Council, which put in place state guarantees and left the ordinary legal system: in particular, it adopted the historic decision to write off the value of the now famous AT1 (Additional Tier 1) convertible bonds from Credit Suisse, with a total value of around 16 billion francs. This caused an earthquake on the financial markets – and hundreds of appeals and requests for compensation against the Confederation poured in – but it drastically reduced the debts of CS, which was purchased by UBS for 3 billion francs. The effect was seen in today's quarterly results: UBS achieved a net profit of 28.9 billion dollars (25.4 billion francs) which includes an accounting profit of the same amount (so-called goodwill – goodwill – negative) precisely in relation to the acquisition.
THE FEDERAL COUNCIL DEPLORES THE DISMISSALS,
The Federal Council deplores the redundancies following the takeover of Credit Suisse (CS) by UBS. “Behind every job cut there are people and families,” reads a written statement from the government. The same words that federal councilor Guy Parmelin repeated to the media microphones. In total, 3,000 jobs will be eliminated in Switzerland.
The executive recalls its expectations, formulated in March, according to which it is necessary to seek socially acceptable solutions for the reduction of jobs and to respect existing obligations. UBS's plans are in line with the Federal Council's initial expectations. «I personally met and welcomed Credit Suisse, UBS and the social partners into my office. It is tradition in Switzerland for social partnership to play its role in these cases", added the minister at the head of the Federal Department of Economy, Education and Research.
GOODBYE TO CREDIT SUISSE, 3 THOUSAND LOSSES AND OTHER SAVINGS
Goodbye to Credit Suisse (CS): the last hopes of those who still hoped for an independent Swiss entity within the UBS galaxy were dashed today, with the announcement of the complete integration. The operation will lead to 3,000 layoffs in Switzerland. Meanwhile, UBS makes a stellar quarterly profit, thanks to the acquisition of a competitor – with the help of state guarantees – at a discount price.
The chosen solution – full merger – is by far the best possible, CEO Sergio Ermotti said in a conference call. It is also the most favorable for customers. The analyzes carried out in recent months have confirmed the need for the acquisition. For CS it wasn't just a question of liquidity: the institute could no longer survive on its own, the 63-year-old argued.
Every canceled job is painful, the executive added. But the elimination of posts – 1,000 concern the integration of CS Switzerland into the banking group, while another 2,000 concern other local areas of activity of the acquired institution – is considered inevitable. It should also be noted that CS's workforce had already been reduced substantially in recent months due to the strong fluctuation: 8,000 fewer people were working for CS at mid-year than at the end of 2022, said Chief Financial Officer Todd Tuckner.
And there could be further cuts on the horizon: UBS announced today that by 2026 it intends to reduce costs by 10 billion dollars (the currency in which it keeps its accounts), a value higher than the 8 billion so far aired by the management. By way of comparison, Credit Suisse's entire liabilities amounted to 18 billion in 2022. The Inside Paradeplatz portal has already put online a speculative calculation, according to which the savings program should lead to the cancellation of 30-35,000 jobs in the coming years. In Switzerland – again according to this source – 10,000 jobs would be at risk.
Meanwhile, UBS records a record profit in the second quarter, thanks to the acquisition of CS: the large bank achieved a net profit of 28.9 billion dollars (25.4 billion francs) which includes an accounting profit of equal amount deriving from the fact that the competing institution was acquired at a price significantly lower than its value. Net of this factor – the so-called negative goodwill – as well as integration-related expenses and acquisition costs, the group's pre-tax profit was $1.1 billion.
The net profit of UBS alone stood at 2.0 billion, in line with the 2.1 billion in the same period of 2022. For CS alone, which has officially belonged to the new UBS group since June, there was a pre-tax loss of 8.9 billion dollars, which drops to 4.3 billion excluding the effects related to the acquisition.
Credit Suisse's customer base has "substantially stabilized", with a net collection of deposits of 18 billion in the April-June period and a positive trend that is continuing also in the third quarter, we read in the press release released early in the morning. UBS for its part continued to attract money: in asset management it achieved the highest net inflow of new capital in a second quarter for over ten years now, with 16 billion dollars. Again, the momentum continues. In total, at the end of June the UBS group had assets under management of 5,530 billion dollars, compared to 4,184 billion at the end of March, i.e. before the acquisition of CS.
The bank is also optimistic about the future of business: uncertainties remain, but client confidence in wealth management has improved. «We expect positive net flows of new assets in our wealth management and asset management businesses», say the management.
«Two and a half months after the closing of the Credit Suisse acquisition, we are wasting no time in creating true value for all our stakeholders» – literally stakeholders: a term that includes shareholders, customers, employees, etc. – «from one of the largest and most complex banking mergers in history», says Ermotti, quoted in the note.
«We are regaining customer trust by reducing costs and taking the necessary actions to achieve economies of scale that will allow us to better focus our resources and direct investments for future growth», continued the manager who assumed operational leadership of the group on April 5 (after having already been CEO from November 2011 to October 2020). «This combination will strengthen our global position as a leading company: one of which our Swiss market can be proud», Ermotti says confidently. «We are honored by this task and the responsibility that has been entrusted to us».
SERGIO ERMOTTI: «A VERY COMPLEX TRANSITION»
«A very complex transition» (a very complex transition). This is how Sergio Ermotti defined the complete integration of Credit Suisse's Swiss activities into UBS at a press conference, with the aim of maintaining market shares in Switzerland. The "best solution", when a possible spin-off of the bank and preserving the Credit Suisse brand had also been discussed.
The CEO of UBS then added that he is convinced that he can preserve the best part of Credit Suisse: "The people and their skills, the clients, the skills".
“With full integration we can save more jobs and this is also the best thing for the Swiss economy,” Ermotti added. But before integration can take place, restructuring is necessary. Regarding the reduction of 3,000 jobs – «mostly in Zurich, where the headquarters of UBS and Credit Suisse are located –, the CEO declared that «every dismissal is painful». And he assured that every person involved will be followed, convinced of the possibility of reintegration into the profession (in addition to "natural fluctuations"). «On the job market in Switzerland, those who have worked at UBS and Credit Suisse have a good chance of finding a new job. But this certainly doesn't make the decision any easier."
The new "megabank", Ermotti therefore assures, will not constitute any dangerous concentration. Because today, with cantonal banks and private institutions, the situation is different compared to 20 years ago, when Swiss banks had greater weight. «The integration will not create the largest bank in Switzerland».
ASIB: «CREDIT SUISSE DISAPPEARS, BUT NOT THE PEOPLE»
«Credit Suisse disappears, but not the people». This is the title of the press release from ASIB, the Swiss Association of Bank Employees, in reference to the announcement of 3,000 layoffs in Switzerland. «Today's announcement marks the end of an era: in Switzerland too, Credit Suisse will be fully integrated into UBS and will disappear over time as a brand and name. However, the thousands of employees who have worked for Credit Suisse with passion and commitment for many years will remain."
From 19 March 2023, ASIB is calling for as many jobs as possible to be safeguarded and for restructuring to take place in a 'socially fair' way over several years. In recent months, negotiations on this issue have been intense. The Association states that «the employees concerned will benefit from a good social plan», that «UBS assumes its social responsibility» and that the process will be «accompanied», with the support of people «where necessary». ASIB demands that the 37,000 employees of the two banks in Switzerland are treated fairly and equally during the integration process, according to the "best-of-both" principle. And he announces that he will "closely follow the political debate in the Swiss financial center".
Natalia Ferrara, co-director of the ASIB, specified: «We must not only talk about figures and laws, but also about people. The last few months have been difficult and challenging for everyone, especially for the employees and staff committees of the two large banks. We need consistent enforcement of rules, not bad laws. UBS must remain a Swiss bank, it must embody and live Swiss values. This includes the tradition of healthy social partnership that has prevailed for decades. Even if we have differences of opinion, we must find an agreement, in the interest of our employees."
Extract from an article published in the Corriere del Ticino
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/economia/che-cosa-si-agita-in-ubs-dopo-il-credit-suisse/ on Tue, 12 Sep 2023 09:17:46 +0000.