2023-08-31 04:50:00
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breaking news:
UBS launches 10 billion savings program, huge loss at CS
Five months after the emergency takeover of Credit Suisse, UBS boss Sergio Ermotti announced how the combined big bank should look in the future.
Announces his plans for Credit Suisse: UBS boss Sergio Ermotti
Photo: Michael Buholzer (Keystone)
CS Switzerland will be fully integrated. The legal entities of UBS Switzerland and CS Switzerland are to be merged in 2024. The CS brand will continue to exist in Switzerland until at least 2025. By then, the integration of the customers into the new systems will be complete. Until then, nothing will change for customers. What will happen to the brand after that is not yet clear.
There were no alternatives to integration, as can be heard from UBS. CS’s business has come to an almost complete standstill in the past few weeks. The bank posted a pre-tax loss of $8.9 billion in the second quarter.
This included value adjustments of CHF 2 billion, goodwill write-downs of around CHF 1 billion, write-downs on CS software of CHF 1.8 billion and provisions for legal cases of CHF 1.3 billion. In addition, there are 540 million francs that CS transferred to the National Bank for the extraordinary financial aid.
A big savings program
Since the completion of the takeover, however, cash outflows in asset management have reduced. After outflows in April and May, inflows were recorded again in June.
The integration is accompanied by a large savings program. By the end of 2026, the new UBS wants to save 10 billion dollars. That’s more than the $8 billion originally announced in March. The largest part of this will be accounted for by the staff. But the bank has not yet disclosed exactly how many jobs are to be cut. However, fluctuation was already high: around 8,000 fewer people were working at CS in the second quarter. During the course of the day, UBS will provide information on how many offices in Switzerland are affected by the merger.
Dismantling of the CS investment bank
UBS, on the other hand, made a huge profit of $29 billion. This is due to the “negative goodwill” that the bank takes on as a result of the takeover of CS. That’s a little less than was expected. The reason is higher losses at CS in the second quarter.
According to UBS, CS must be completely restructured. About a third of the CS investment bank remains. For this purpose, the entire infrastructure of the CS investment bank will be shut down.
The takeover of Credit Suisse entails numerous risks for UBS. The integration will tie up resources and incur high costs for years to come. UBS therefore wants to largely dismantle the crisis-prone CS investment bank, which has tied up a lot of capital, and focus more on wealth management. Following the example of the previous UBS.
How things will continue with CS Switzerland was one of the most important questions that UBS had to answer today. This also has to do with the loss of substance in Credit Suisse’s Swiss business. The former flagship discipline of the bank was the only CS division to make a profit in the fourth quarter of 2022. But even then she was struggling with high cash outflows. By the end of March, private customers had withdrawn CHF 6.9 billion.
After a hectic rescue operation it was announced in a memorable March 19 press conference that UBS would acquire Credit Suisse. Purchase price: a good 3 billion francs. In addition, special bonds of Credit Suisse in the amount of 17 billion dollars were written off, i.e. the bank’s debts were canceled and its equity capital strengthened. The Confederation and the National Bank granted financial aid and a loss guarantee for toxic CS assets totaling CHF 259 billion.
At the height of the crisis, the failed bank drew on CHF 178 billion of that. Most of it has since been repaid. On August 11, UBS terminated the contract with the federal government for the loss guarantee and for extraordinary financial aid.
An end with a long announcement
The former second largest bank in Switzerland has gotten into difficulties after years of scandals and mismanagement. The scandal surrounding the crashed US investment company Archegos and the bankruptcy of the Australian financial company Greensill in spring 2021 caused gigantic losses.
CS boss Ulrich Körner and bank president Axel Lehmann tried a last restart of Credit Suisse in 2022. As late as October, she presented a new strategy that included outsourcing the investment bank to CS First Boston under the leadership of the controversial banker Michael Klein.
However, she was not able to convince her customers and investors. Even a capital increase of 4 billion francs did not ensure that the bank was more stable. Your last financial year was a horror year: In 2022, CS closed with a loss of 7.3 billion francs.
The outflow of assets continued. Viewed over the year as a whole, they totaled 123 billion Swiss francs.
That was too much for the bank. On March 19, her end was sealed.
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