UBS to cut 3,000 Swiss jobs as it slashes costs by $13.5 billion

ZURICH - UBS Group plans to cut 3,000 jobs in Switzerland in the next couple of years, as it offered the first glimpse of how it seeks to achieve more than US$10 billion (S$13.5 billion) in cost savings after taking over Credit Suisse.

UBS also announced it would be fully absorbing Credit Suisse’s domestic bank – and the ensuing job losses are expected to result in a backlash in Switzerland.

The world’s largest wealth manager could have spun off the business and floated it in an initial public offering (IPO) but the domestic bank has been a solid profit-maker for Credit Suisse and in 2022 it was the only division in the black.

“Our analysis clearly shows that a full integration is the best outcome for UBS, our stakeholders and the Swiss economy,” chief executive Sergio Ermotti said in a statement.

He wrote in a memo to staff to say that 1,000 job redundancies will result from integrating Credit Suisse’s domestic bank, while another 2,000 would result from the need to profoundly restructure Credit Suisse.

UBS shares jumped as much as 7.2 per cent after the open in Zurich on Thursday, having gained almost 40 per cent in 2023.

The prediction of more than US$10 billion in cost savings by end-2026 compares with an earlier estimate of US$8 billion by 2027. Most savings are set to come from reducing headcount.

Hanging on to existing Credit Suisse clients is seen as key if UBS is to successfully pull off the Herculean deal.

Credit Suisse reported net asset outflows of 39 billion Swiss francs (S$59.9 billion) in the second quarter, underscoring that the rescue has failed to stem the loss of confidence in its franchise.

But UBS said the outflows took place at a slower pace compared with previous quarters and turned positive in June.

UBS’ global wealth management reported net new money of US$16 billion, its highest for the second quarter in over a decade.

The shotgun marriage to its fallen rival at the behest of the Swiss authorities – the first-ever merger of two global systemically important banks – has created both opportunities and risks for UBS.

On the one hand, analysts note that UBS acquired Credit Suisse for a song – just three billion Swiss francs – while gaining a large asset base, good client relationships and talented employees.

At the same time, analysts warn that the complexity and the hasty nature of the deal brings significant execution risks as UBS must aggressively cut jobs, shrink Credit Suisse’s investment banking operations and manage outflows as clients seek to spread risk.

UBS booked net profit of US$29 billion –  the biggest-ever quarterly profit for a bank. The bumper profit is due to a huge one-off gain that reflects how the acquisition costs were far below Credit Suisse’s value.

Underlying profit for the first combined UBS-Credit Suisse quarter came in at US$1.1 billion. 

Groupwide UBS results include just one month of Credit Suisse earnings as the deal closed only in June. REUTERS, BLOOMBERG