Switzerland's largest financial holding company, UBS AG, took another step toward integrating Credit Suisse, its former rival, which has experienced severe financial difficulties since 2022. On Monday, July 1, the bank formalized the merger with Credit Suisse's Swiss branches, after which the Swiss unit of Credit Suisse was removed from the Commercial Register of the Canton of Zurich and abolished as a legal entity.
It should be noted that Credit Suisse's Swiss business, which includes retail banking services for clients in Switzerland, was considered Credit Suisse's most stable subsidiary. After the merger of the banks, the head of Credit Suisse's Swiss branch, Andre Helfenstein, decided to leave the bank, according to UBS. As a result of this new transaction, Credit Suisse customers will automatically become customers of banking giant UBS. "The migration of the majority of client operations to Switzerland will take place in 2025 and will be gradual," adds a UBS spokesperson. UBS AG will become the successor to all liabilities, including outstanding debts of the failed bank.
In a June interview with the Zurich newspaper NZZ explained that the aim of this move is to reduce the number of branches in Switzerland to 194 from the current 95 (Credit Suisse) and 190 (UBS). From that point, UBS will really be able to begin making significant cost cuts, said Andreas Venditti, an analyst at Vontobel. He also warns that the bank will face a major challenge in migrating its IT systems. The migration is projected to last until the end of 2026. Meanwhile, group CEO Sergio Ermotti warns that only 10% of Credit Suisse's software will be retained.
Avoiding bankruptcy
The merger of Switzerland's two largest banks is a monumental event given their size and the speed at which it was accomplished. For the record, this grand merger began to avoid the bankruptcy of Credit Suisse, which was on the verge of financial collapse, in the first quarter of 2023.
The collapse of Credit Suisse happened in a matter of days, even though the bank had been caught up in financial scandals before. The problems started back in 2021, when the bank lost almost 5 billion dollars due to cooperation with the fund Archegos Capital, in the same year announced the default. Already in 2022, Credit Suisse's share price fell by 53% and its assets shrank by one and a half times, which significantly alienated investors. At the end of 2022, Credit Suisse lost about 8 billion dollars.
On March 19, 2023, under pressure from the Swiss authorities, UBS agreed to absorb its former competitor. This decision was made by the Swiss authorities in order to avoid a major financial crisis like the one that occurred in 2008. It is important to note that the two institutions were among the 30 banks in the world that were considered too big to fail. Although the official takeover agreement was reached at the end of June 2023, the merger took place in several stages. Initially, the two banks continued to operate separately while the integration process was underway. The last significant step was taken on May 31, 2024, when UBS completed the legal merger of the holding companies of the two banks.
So far, the process has been welcomed by investors, which has boosted the bank's share price. The merger takes time, but the integration process has been relatively smooth. "The initial shock is over," said Swissquote analyst Ipek Ozkardeskaya. At the same time, issues of corporate culture and job cuts remain pressing concerns.
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