UBS chairman warns of ‘execution risks’ associated with takeover of rival Credit Suisse

Swiss banking major UBS Chairman Colm Kelleher on Wednesday said that the unexpected takeover of rival Credit Suisse a significant milestone for Switzerland and for the global financial industry, which carries a “huge amount of risk”.  

Addressing the annual shareholder meeting on Wednesday, Kelleher said that the takeover will take at least three to four years to take shape, excluding Credit Suisse’s non-core investment bank portfolio, which will have more than $5 trillion in total invested assets.  

Describing the transaction as "the first merger of two globally systematically important banks," Kelleher said the takeover "means a new beginning and huge opportunities ahead for the combined bank and for the Swiss financial center as a whole." 

“Having a clear vision and a sound strategy is important….This transaction is the first merger of two global systemically important banks. This is not in any way an easy deal to do and brings with it execution risk,” Kelleher said.  

Last month, Swiss authorities announced that UBS would buy Credit Suisse in a shotgun merger to contain further banking turmoil after the global lender had come to the brink of collapse. Kelleher’s address on Wednesday was the first meeting after the announcement, where 1,128 shareholders gathered. 

He added that UBS will focus on its wealth management and Swiss business and confirmed that the bank would reduce the capital allocated to its investment arm to below 25 per cent of risk-weighted assets. 

Outlining UBS's strategy, Kelleher said the Credit Suisse takeover would help the bank to deliver value to the Swiss economy and accelerate its strategic plans to expand its position as the leading wealth manager worldwide, particularly through growth in prominent markets like the US  and Asia. 

“Whilst we did not initiate these discussions, we believe that this transaction is financially attractive to UBS shareholders,” Kelleher said. 

He added that there is a “huge amount of risk” associated with the integration, which will have more than $5 trillion in total invested assets.  

Kelleher said UBS expects to remain well capitalised and “significantly above” its capital targets by the time the deal closes.  

In 2022, UBS reported a full-year profit of $7.6 billion, while its shares gained more than 10 per cent since the turn of the year. 

Last week, UBS said it had rehired Sergio Ermotti as the new chief executive to steer the massive takeover, which came as a surprise move. 

Experts feel Ermotti’s return to the bank was planned to restore calm, as the country’s long-established reputation for financial stability was shaken after the Credit Suisse crisis.  

On Tuesday, Credit Suisse Chairman Axel Lehmann, while addressing the last AGM of the flagship bank, apologised to the shareholders for failing to contain the crisis, which led to its closure. In an emotional speech at Credit Suisse's last annual general meeting, chairman Axel Lehmann spoke of being caught off guard, pain, bitterness, accumulated scandals, and the grief that remains.

In his opening address at the last AGM,  Lehmann said that he had run out of time to turn the bank around, despite his belief "until the beginning of the fateful week" that it could survive. He said: "It is a sad day. For all of you, and us. The bitterness, anger, and shock of all those who are disappointed, overwhelmed, and affected by the developments of the past few weeks are palpable."

Earlier it was reported that the merger could see up to 36,000 jobs being cut across the world. On Sunday, Swiss newspaper SonntagsZeitung Weekly said management was mulling cutting between 20 per cent and 30 per cent of the workforce, meaning between 25,000 and 36,000 jobs across countries.

About 11,000 jobs could be cut in Switzerland alone, according to the weekly, which did not provide details of which posts could be targeted. Before the merger, UBS and Credit Suisse employed slightly more than 72,000 and 50,000 people, respectively.

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