Credit Suisse and UBS leadership consider merger option

The management of Swiss banking rivals Credit Suisse and UBS are reportedly weighing a merger of their businesses. Patrick Brusnahan writes

This is set to rock the private banking world if completed. What are the chances and what could the impact be?

According to reports, Axel Weber is leading the project which has been nicknamed Signal.

Weber has consulted with Credit Suisse chair Urs Rohner on the project.

The idea has also been conveyed to Swiss finance minister Ueli Maurer and financial watchdog Finma, according to Swiss finance globe Inside Paradeplatz.

A merger is anticipated early next year, added the report.

If materialised, it would create a banking giant in continental Europe that would compete with other Wall Street giants.

Weber would chair the amalgamated entity while the CEO will be from Credit Suisse.

Spokespeople for both UBS and Credit Suisse refused to comment on the matter.

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The merger is believed to cut down nearly 15,000 of staff headcount, equivalent to 10-20% of the total workforce.

Credit Suisse and UBS have employee strength of around 50,000 and 70,000 globally, respectively.

Collectively, the two banks have nearly 35,000 in Switzerland, of which at least 5,000 would be reportedly slashed in the first phase.

More redundancies are likely to follow and such a deal could be under strict regulatory scrutiny.

Meanwhile, both UBS and Credit Suisse have made senior management changes this year.

Credit Suisse appointed Thomas Gottstein as the new CEO, replacing Tidjane Thiam.

On the other hand, UBS hired ING chief Ralph Hamers to serve as its new group CEO, replacing Sergio Ermotti.

Speaking to PBI, Ray Soudah, chairman and founding partner of MilleniumAssociates AG, said: “The potential merger between UBS and Credit Suisse is a clear signal that both banks are still since many years struggling to grow despite having strong wealth management businesses and large domestic national market shares.

“Perpetual cost cutting has been the name of the game for both since the last financial crisis and is set to increase further with or without a mega merger with such events unlikely to improve the future share prices except temporarily. The best option would be a merger of operational and technology systems into a separate utility keeping client facing businesses and risk management issues separate.”

Ian Woodhouse told PBI: “Recent rumours are part of a wider restructuring of the global wealth industry now underway as larger players combine or acquire to gain scale advantage to capture future opportunities.

“This is part of a recent broader trend now underway toward global competitive repositioning reflecting the need for the FS industry to accelerate a shift their business models focus towards capital light, higher quality growing, less volatile and recurring revenues streams provided by the growing affluent, high net worth and ultra-high net worth clients.

“This scaling at speed is being accomplished by either existing players combining their disparate, siloed affluent retail, business and private banking entities together to realise scale benefits from combining technology, people and distribution costs and reinvesting to drive future profitable growth.

“This M and A activity has recently been evidenced by a recent second round (the first being after the financial crisis) of cross industry large mergers in the US market. Here you have had some significant recent acquisitions by a couple of the major investment banks in the US to accelerate their shift towards wealth management.

“Also at least one major wealth management firm has made a significant acquisition to scale up. These were already underway before Covid-19 and together these are accelerating the pace of M&A which will broaden out to Europe and Asia as banks in these regions also seek to explore ways to accelerate and scale the realisation of profitable growth opportunities in a more volatile and less certain environment as well as to meet the challenges of some of their repositioned and scaled US competitors as they diversify outside of their home market.”