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ECONOMY

UBS merger with Credit Suisse raises job fears in Switzerland

Among the many concerns over the new megabank created by the merger of UBS and the beleagured Credit Suisse is how it will affect jobs and competition in Switzerland's banking sector.

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What are the most in demand jobs right now? Photo by Glenn Carstens-Peters on Unsplash

The Swiss government strongarmed UBS into buying its rival for $3.25 billion after the collapse of three US lenders in March raised concerns about Credit Suisse’s own financial health, following a series of scandals in recent years.

But little has been said about the most robust part of the sprawling bank – its domestic retail banking division, responsible for mortgage loans and financing for Swiss companies.

Credit Suisse’s heavy losses were mostly due to the international wealth management and banking divisions.

The Swiss division’s turnover only fell by five percent last year – whereas turnover in international wealth management slid by nearly a third, and the investment bank tumbled 54 percent.

Investors are becoming impatient with the scattered details around the complex integration.

READ ALSO: Gold, secrecy and wealth: 6 Swiss banking myths that need to be busted

UBS insisted this week that “all options” would be considered for the Swiss activities of the bank, promising to share more details in the coming months.

UBS now ‘too big’

But investors are anxious to know whether UBS will integrate the Swiss banking division into its own domestic business, sell it, or even split it through a share offering.

“One of the reasons that supports the idea of a spin-off is probably the fact that UBS has gotten too big after swallowing Credit Suisse for the Swiss market,” said Ipek Ozkardeskaya of Swissquote.

“Another could be to maximize the Swiss branch potential and to offer Swiss clients an alternative to UBS.”

Keeping it as an independent unit appeals to many in Switzerland – particularly as it could prevent mass layoffs in the important banking sector.

Together, the two banks employ 120,000 people worldwide, including 37,000 in Switzerland.

“Full integration means that UBS would have to take a lot of costs and fire a lot of people at Credit Suisse,” said Andreas Venditti, analyst at asset manager Vontobel.

Credit Suisse itself had considered a partial IPO of its Swiss branch in
2016.

“We are still in favour of splitting off the Swiss branch,” the Foundation Ethos, which represents pension funds in Switzerland, told AFP.

Ethos said this was the best option not only to protect jobs, but to avoid concentrating risks in one giant bank.

Venditti says that UBS could “carve out Credit Suisse Switzerland’s front office only… (the brand) would survive and the two banks would compete.”

“If in a few years’ time the situation has stabilised then it would be a good time to bring this new smaller Credit Suisse to the market,” he said.

J.P. Morgan analysts said splitting it off as an independent arm could create a division valued at a minimum of $10 billion for UBS.

“We know that a spin-off could unlock value,” said Ozkardeskaya.

And it could also help calm jittering investors about the threat of “a giant that became even more giant after the merger”, she said.

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ECONOMY

UBS marks takeover milestone as Credit Suisse is no more

Swiss banking giant UBS on Friday completed the merger of its parent company with Credit Suisse AG as its fallen rival legally ceased to exist, more than a year after the emergency takeover.

UBS marks takeover milestone as Credit Suisse is no more

In March 2023, Switzerland’s biggest bank was strongarmed by the government into buying Credit Suisse over fears that the second largest lender in the country might go under and spark a global financial crisis.

In a statement, UBS said Credit Suisse AG — or limited company — had been deleted from the Canton of Zurich’s commercial register, and has thus ceased to exist as a separate entity.

The bank added that Credit Suisse AG’s clients are now considered to be clients of UBS AG.

READ ALSO: Is the UBS takeover of Credit Suisse good for the Swiss economy?

However, Credit Suisse customers may continue to use Credit Suisse tools and platforms for an interim period, except in certain cases.

“Today we have achieved a significant milestone in our integration journey,” said UBS chief executive Sergio Ermotti.

Under pressure from the Swiss government, UBS agreed to take over the troubled lender for $3.25 billion, a modest sum for an institution ranked among the 30 banks worldwide considered too big to fail.

However, the takeover opened up a new chapter for UBS, which found itself forced to clean up a bank rocked by repeated scandals.

After the takeover was completed in June 2023, the two banks had initially continued to operate separately.

But with Friday’s merger, UBS has taken over Credit Suisse’s rights and obligations.

“The merger of our parent banks is critical to facilitating the migration of clients onto UBS platforms,” Ermotti said.

“It will also unlock the next phase of cost, capital, funding and tax benefits from the second half of 2024,” he added.

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