2023-11-07 18:47:22
Why UBS can do what Credit Suisse couldn’t
The legacy assets of the swallowed bank are shrinking quickly. Customer assets are growing. What is going well at the new megabank and where there are problems.
The takeover of Credit Suisse is going according to his script: UBS boss Sergio Ermotti.
Photo: Michael Buholzer (Keystone)
UBS writes its first quarterly loss in six years. It turns out even bigger than expected. The analysts expected one $400 million shortfallhe even cheated 800 million dollars. Nevertheless, UBS shares rose more than 2 percent on Tuesday after these figures were announced. How is that possible?
What is going better than expected at UBS?
The bank was able to recover customer funds that had flown from Credit Suisse much more quickly than expected. Apparently UBS management assumed that it would take six months longer for customers to return to the combined major bank.
In the asset management business, however, $22 billion in funds previously withdrawn from CS customers came back to UBS. UBS sees this as a sign of trust.
However, US bank analysts Keefe, Bruyette and Woods warn against attaching too much weight to the value. It could indicate a slowdown in new money inflows compared to the previous quarter’s data, where there were already inflows over a short period of time. A possible turnaround in the asset management business therefore remains to be seen.
Analysts at Zürcher Kantonalbank are more optimistic. They write: “The bank was thus able to clearly stabilize the situation at Credit Suisse and get back into the green zone earlier than expected.” The bank also managed to reduce the risk positions taken over from Credit Suisse more quickly.
What the CS leadership tried unsuccessfully for years worked at UBS within a few months. For what reason?
Those close to UBS management say that it would have been difficult for Credit Suisse to reduce the legacy burdens so quickly. This would have resulted in even greater losses and required larger capital buffers.
UBS boss Ermotti made it clear once again that the reduction was urgently needed and that it was still necessary to save costs. CS was “structurally loss-making,” said the UBS boss at a media conference.
What happens next with job cuts?
In its statement, UBS makes a rather vague statement: “The number of employees in the combined company fell by over 4,000 in the reporting quarter and by a total of more than 13,000 on a combined pro forma basis compared to the end of 2022.” The megabank currently employs 116,000 people.
However, there is a difference compared to the information from last year’s annual reports. Towards the end of last year, the two banks together had around 124,500 employees. The decrease compared to the current value would therefore be “only” 8,500 employees.
The difference can probably be explained by the fact that both internal workers and people from third-party companies such as consulting firms who have previously worked for the big banks are counted.
The bank does not disclose what proportion of the job cuts that have taken place so far are due to layoffs and what proportion is due to natural fluctuation. “It’s a mix of different measures,” said UBS CFO Todd Tuckner.
Is UBS losing the wrong people?
In the past few weeks there have been repeated reports about top UBS employees joining the competition, for example Sabine Hellerwho will become the new Zurich boss of the Geneva private bank Lombard Odier.
Individual managers are also saying goodbye because they are likely to have a difficult time within UBS and see better opportunities for their own careers outside the megabank. For example, the former CS banker Francesca McDonagh, the head of the German investment company Universal Investment.
Francesca McDonagh left Credit Suisse after it was taken over by UBS.
Photo: PD
“With such a major integration, people we would have liked to keep also leave,” said UBS boss Ermotti. He is convinced that the bank has excellent people. Both from UBS and Credit Suisse.
Why is UBS cutting jobs but at the same time paying 500 million in retention bonuses?
UBS wants to retain employees who are particularly important for integration to the bank. In return, she pays a one-time retention bonus; this amounts to 500 million dollars. The salary packages were offered between the announcement of the takeover in March and the completion in June.
The quarterly report states that the bonuses were “offered to select Credit Suisse employees prior to the acquisition date to support the closing of the transaction and the early phase of integration.”
According to UBS CFO Todd Tuckner, the employees should not only be customer advisors, but also specialists in lower-level areas – i.e. from IT or legal services. The bank does not disclose how many employees benefit from the special regulation.
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