In a move that has been long-rumored and highly anticipated, UBS Group AG has announced its acquisition of Credit Suisse Group AG in a major banking merger. The deal, brokered by the Swiss government, comes as Credit Suisse has been struggling to save itself and was in the process of cutting 9,000 jobs before the merger was even announced. The final number of job cuts is expected to be significantly higher, according to insiders familiar with the discussions.
The two banks have significant overlaps, with almost 125,000 employees between them and about 30% of the total in Switzerland. UBS has indicated that significant job cuts will be made, with a goal of reducing the combined company's annual cost base by more than $8 billion by 2027. This is almost half of Credit Suisse's expenses from last year. UBS Chairman Colm Kelleher stated that the firm is determined to keep Credit Suisse's profitable Swiss unit, but is less enthusiastic about its investment bank, which will be shrinking.
The deal carries risk in Asia, where the two firms are among the largest wealth managers. Clients who currently have money with both firms may move some of it to a competitor to avoid having too much exposure to a single firm. However, Kelleher promised that UBS will do what it can to keep the uncertainty for Credit Suisse staff as short as possible.
Credit Suisse CEO Ulrich Koerner said he had already cut about 8% of headcount before the merger announcement. The two firms' management will stay in place until the deal closes, at which point their future will become a decision for UBS.
The merger is expected to have a significant impact on the Swiss banking industry and may lead to further consolidation in the sector. It is also likely to create a new powerhouse in wealth management, as UBS and Credit Suisse have been major players in this area. However, the downsizing of Credit Suisse's investment banking business may put an end to the dreams of a CS First Boston spinoff.