With its Credit Suisse takeover officially wrapped up, UBS must now make good on its promise that the government-orchestrated rescue will deliver both for shareholders and Swiss taxpayers.
The logo of Swiss bank UBS is seen at its headquarters in Zurich, Switzerland October 25, 2022. REUTERS/Arnd Wiegmann, UBS must now make good on its promise that the government-orchestrated rescue will deliver both for shareholders and Swiss taxpayers.
Switzerland must now contend with a bank whose balance sheet is twice as big as its economy, while Sergio Ermotti, who was brought back in as CEO to oversee the mega merger, faces tough strategic decisions as UBS integrates its smaller rival against an uncertain economic backdrop.Possibly the first hurdle is a politically fraught decision on Credit Suisse's "crown jewel", its domestic business.
A combined business would have a dominant position in the Swiss loan market, while public unease over a Swiss mega-bank, could lead to even tougher regulation and capital requirements.BLEEDING STAFF, CLIENTS? "One plus one will not equal two. A sizeable portion of the assets will be lost and that will have an impact on the profitability for UBS of the deal," said Alan Mudie, chief investment officer at Woodman Asset Management.
All that contributes to uncertainty, which could make it harder for the combined group to keep top performers and recruit new staff, some observers warn. The Swiss government is providing a guarantee of up to 9 billion Swiss francs for potential losses related to Credit Suisse's investment bank on top of up to 5 billion francs in losses UBS has agreed to assume.Ermotti promised his team would "work very hard" to avoid any consequences for taxpayers and analysts say that with Swiss federal elections due in October, UBS needs to tread carefully.
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