GENEVA - UBS executives sought to assure investors on Wednesday that Switzerland’s largest bank can make its unexpected takeover of Swiss rival Credit Suisse work and pay off for its shareholders.

While describing the biggest bank rescue since the global financial crisis as a milestone for the industry and a major challenge for the bank, chairman Colm Kelleher told UBS shareholders that it also meant “a new beginning and huge opportunities ahead for the combined bank and for the Swiss financial centre as a whole”.

In March, the Swiss authorities announced that Switzerland’s biggest bank would absorb its stricken closest domestic rival in a shotgun merger to stem further banking turmoil after the smaller lender had come to the brink of collapse.

But some UBS shareholders may have concerns closer to home as to what it means for their personal investments now that the bank is taking on an institution that repeatedly got itself into trouble.

Mr Kelleher told the bank’s shareholder meeting in Basel that UBS was confident in its ability to successfully manage Credit Suisse’s integration and that the combined bank would remain well capitalised.

“We believe the transaction is financially attractive for UBS shareholders,” he said.

The hastily arranged rescue angered and unsettled not only both banks’ shareholders, but also many in Switzerland.

A survey by political research firm gfs.bern found that a majority of Swiss did not support the deal, which would create a financial institution with assets double the size of the country’s annual economic output.

As shareholders expressed their frustration over being kept in the dark, with one calling it “an insult”, some also voiced concerns about potential job losses and the new giant bank’s adverse impact on competition.

Vice-chairman Lukas Gaehwiler sought to quell such fears, saying there were around 250 banks in the country and therefore enough competition. He also said it was too early to speculate about jobs before the merger was completed, which he expected to happen within a few months.

On Sunday, Swiss daily Tages-Anzeiger cited an unnamed senior UBS manager as saying the workforce of the combined group could shrink by 20 to 30 per cent.

ALL OPTIONS ON TABLE

Mr Gaehwiler also said that “all options are on the table” concerning Credit Suisse’s domestic business, which would continue to operate under its old brand in Switzerland for the foreseeable future.

In contrast to its smaller rival, UBS had been on a steady course. It reported a net profit of US$7.6 billion (S$10.1 billion) for 2022 and strong inflows in wealth management, the company’s flagship division.

Addressing shareholders for the final time as chief executive, Mr Ralph Hamers acknowledged that the merger has led to new priorities for the bank, bringing a change at its helm.

“The acquisition of Credit Suisse will be a major challenge,” he said, while echoing the bank’s chairman in highlighting new opportunities. “It is expected to create a business with more than US$5 trillion in total invested assets.”

Wednesday’s annual general meeting (AGM) took place in Basel, one of the two birthplaces of UBS along with Zurich.

The AGM was being held in the St Jakobshalle indoor arena, famously the stomping ground of Swiss tennis great Roger Federer – Credit Suisse’s top brand ambassador.

UBS shareholders had voted to re-elect Mr Kelleher as chairman. He received 89.9 per cent of votes, a sign of shareholders’ confidence in the Irishman’s ability to lead the bank as it navigates the challenge of absorbing Credit Suisse after a surprise takeover engineered by the Swiss authorities.

Shareholders also voted to re-elect the remaining members of the bank’s board of directors.

Bad culture concern

With Mr Hamers bowing out, Wednesday marked Mr Sergio Ermotti’s return as chief executive, having been called back to UBS to handle the delicate integration process.

The 62-year-old Swiss banker ran UBS between 2011 and 2020, when he was brought in to restructure and stabilise the bank after its state bailout during the 2008 global financial crisis, followed by the 2011 losses of a rogue trader, who blew US$2.3 billion.

Mr Kelleher said he felt that Mr Ermotti would be the “better pilot” for the bank’s new flight path than the digital transformation-focused Hamers, who will stay on for a handover period.

UBS will become a banking colossus, with US$5 trillion of invested assets.

Mr Kelleher has voiced his concerns about not only the execution risks in carrying out the merger but also about the dangers of “bad culture” from Credit Suisse, primarily in its investment banking, bleeding into UBS.

There are also the numerous disputes accumulated by Credit Suisse that UBS will have to settle, after having already spent several years settling its own.

Risky business

Roger Said, director of the Swiss shareholder organisation Actares, said that Ermotti “will have to put an end to the irresponsible risk culture that has existed for years at Credit Suisse, as well as drastically reduce risky business sectors”.

The UBS AGM comes the day after Credit Suisse held its final AGM before the 167-year-old bank is swallowed up by UBS.

Credit Suisse chairman Axel Lehmann said he was “truly sorry” that the national institution could not be saved as he faced angry and tearful shareholders whose money has gone up in smoke.

He said that “ultimately there were only two options: deal or bankruptcy”.

Credit Suisse shareholders have seen the value of their investment plunge from 12.78 Swiss francs per share in February 2021 to the 0.76 francs they will receive in the US$3.25-billion merger.

The Ethos foundation, which represents pension funds in Switzerland and owns stakes in both banks, said Credit Suisse shareholders were mobilising to get UBS to think about giving them more than 0.76 francs per share.

“There are bases being created to potentially go to court to request a review of the exchange ratio,” its director Vincent Kaufmann told AFP. AFP, REUTERS