Credit Suisse’s 9,000 job cuts are foretaste of UBS takeover

Zurich – Even before

Credit Suisse’s government-brokered takeover,

the Swiss lender was in the process of cutting 9,000 jobs in an effort to save itself.

That is only the beginning after rival UBS agreed to buy the troubled bank, according to people familiar with the discussions, with one person estimating the final toll could be a multiple of that number.

The merger creates significant overlaps. The two lenders together employed almost 125,000 people at the end of 2022, with about 30 per cent of the total in Switzerland.

UBS chairman Colm Kelleher said it is too soon to know a job cut number, but UBS indicated it will be significant. The bank said in a statement on Sunday that it plans to cut the combined company’s annual cost base by more than US$8 billion (S$10.7 billion) by 2027. That is almost half of Credit Suisse’s expenses in 2022.

Mr Kelleher said the firm was determined to keep Credit Suisse’s profitable Swiss unit, despite concerns about concentration in the domestic market from this deal. He was also clear that UBS is excited about Credit Suisse’s wealth management business, but less so about its investment bank. The investment bank will be shrinking, likely ending the dreams of a CS First Boston spin-off.

“Let me be very specific on this: UBS intends to downsize Credit Suisse’s investment banking business and align it with our conservative risk culture,” Mr Kelleher said at Sunday’s press conference.

The UBS chairman said he understood the coming months would be “difficult” for Credit Suisse staff and promised UBS will do what it can to keep the uncertainty as short as possible.

Credit Suisse told staff in an internal memo that it will work to identify which roles might be impacted and “will aim to continue to provide severance in line with market practice”. There will be no changes to payroll arrangements and bonuses will still be paid on March 24, the memo said.

“We know that many of you will have been following the intense media coverage over the past 48 hours on the future of Credit Suisse and appreciate the enormous uncertainty and stress that this has caused,” Credit Suisse chairman Axel Lehmann and chief executive Ulrich Koerner said in a separate memo.

Credit Suisse said it does not anticipate any changes to any agreed on upfront cash awards and will also pay the cash component of the “transformation award” that had been communicated earlier. It will confirm any impact on the equity component.

Under the deal, Mr Kelleher and UBS CEO Ralph Hamers will retain their roles in the combined entity. A representative for Finma, the Swiss regulator, said at the press conference that Credit Suisse’s management will stay in place until the deal closes. Then, their future becomes a decision for UBS.

UBS’ Mr Hamers told staff not to talk about business matters with counterparts at Credit Suisse. “Please remember that, until this deal closes, Credit Suisse is still our competitor,” he wrote in a memo to employees.

In Asia, where the two firms rank among the largest wealth managers, the deal carries the risk that clients who currently have money with both firms move part of it to a competitor to avoid having too much exposure to a single firm.

Credit Suisse said in its internal memo that its wealth assets are operationally separate from UBS for now, but once they merged clients might want to consider moving some assets to another bank if concentration was a concern. BLOOMBERG