UBS announces $10 billion cost cuts and 3,000 job closures in Switzerland

UBS Group on Thursday announced a sweeping plan to cut more than $10 billion in costs and cut 3,000 jobs in Switzerland alone after taking over Credit Suisse earlier this year.

The plan to cut about one in 12 jobs in Switzerland suggests the scale of the change that has taken place at the fledgling banking giant, hastily formed earlier this year amid the international banking crisis that saw customers withdraw tens of billions of dollars from Credit Suisse.

The first round of job cuts follows the world’s largest asset manager’s decision to absorb the local branch of Credit Suisse – a robust profit firm which, last year, was the former rival’s only division to show positive results – instead of dividing it .

“Our analysis clearly shows that full integration is the best outcome for UBS… and for the Swiss economy,” said Sergio Ermotti, Chief Executive Officer of UBS.

The executive wrote in a note that 3,000 jobs will be eliminated in Switzerland, but most through mechanisms that include early retirement. Worldwide, 8,000 Credit Suisse employees have already left the bank in the first half of the year.

The forecast of more than $10 billion in cost savings by the end of 2026 compares with a previous estimate of $8 billion by 2027.

The announcement sent UBS shares soaring to levels not seen since 2008.

UBS also said it is seeing a recovery in confidence among its wealthy clients and hopes stronger financial markets could also help boost the fees it receives for financial transactions.

However, UBS’s decision to take over Credit Suisse’s local business is contested in Switzerland. Ethos adviser, who represents Swiss pension funds and the foundations that held stakes in both banks, said the spin-off of the Swiss bank would have avoided “a serious systemic risk to Switzerland, a serious negative impact on employment and problems for the competition”. Ethos filed a class action lawsuit to obtain a better price from UBS for the acquisition. Had Credit Suisse in Switzerland remained intact and independent, as some politicians had hoped, fewer jobs would have been at risk.

The largest bank merger since the 2008 global financial crisis, orchestrated in a weekend by the Swiss government to avert the collapse of Credit Suisse, has created a group whose assets can be compared to the country’s economic output, whose regulators were already in difficulty. check the big banks.

Job cuts will be painful for Zurich, Switzerland’s financial center where banks dominate the landscape. According to the Swiss Bank Employees Association, the 37,000 local employees of the two banks should be treated fairly and equally.

WHAT WILL COME

Swiss headcount cuts offer a glimpse of future prospects for the global bank, which stretches from Wall Street to London.

Most of UBS’s announced cost savings are expected to come from payroll cuts, and analysts estimate that between 30,000 and 35,000 jobs could be shed by the group globally.

Analysts welcomed the announcement, although many were cautious. Jefferies described the integration of the two companies as “long, challenging and probably bumpy.” “The group remains a construction site,” Deutsche Bank analysts said.

The findings also showed UBS’s difficulties in persuading Credit Suisse’s wealthy clients to stay with the group. Their retention is seen as essential for UBS to successfully complete the integration of its former rival.

Credit Suisse reported net asset outflows of CHF39 billion ($44.4 billion) in the second quarter, underlining that the bailout by the government and UBS failed to stem the loss of client confidence.

But UBS said outflows slowed and reversed in June. UBS Global Wealth Management reported net new cash of $16 billion

The merger with Credit Suisse, the first merger of two systemically important global banks, created both opportunities and risks for UBS.

Analysts note that UBS acquired Credit Suisse for just CHF3 billion, but for that to work, UBS needs to cut costs, downsize Credit Suisse’s investment bank and keep its wealthy clients on board.

UBS reported net income of $29 billion in the second quarter. The results included just one month of Credit Suisse numbers, as the deal only closed in June.

The extraordinary profit comes from a huge one-time capital gain which reflects the fact that the acquisition costs were well below Credit Suisse’s value.

Source: Terra

Rose

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