UBS initiates $10 billion in cuts, cuts 3,000 jobs after Credit Suisse deal

ZURICH (Reuters) – UBS Group (UBSG.S) has embarked on a comprehensive cost-cutting plan of more than $10 billion, saying on Thursday it will cut 3,000 jobs in Switzerland alone after its takeover of battered rival Credit Suisse.

The plan to cut nearly one in 12 Swiss jobs gives a glimpse of the scale of change in the newly created banking giant, as it grapples with the task of swallowing a rival that collapsed after panicked customers withdrew tens of billions.

The initial round of job cuts follows a decision by the world’s largest wealth manager to absorb the domestic arm of Credit Suisse – a powerful profit maker that last year was Credit Suisse’s sole division – rather than spin it off, which UBS has also done. It is considered.

“Our analysis clearly shows that full integration is the best outcome for UBS… and for the Swiss economy,” said CEO Sergio Ermotti.

He wrote in a note to staff that 3,000 Swiss jobs would be cut, while more people would leave of their own volition, for example, through retirement. Globally, 8,000 Credit Suisse banks have already left during the first half of the year.

It compares the forecast of more than $10 billion in cost savings by the end of 2026 with an earlier estimate of $8 billion by 2027.

The news is up UBS shareswhich rose more than 5% in early afternoon trade, to highs not seen since 2008, after the cuts were announced along with the first financial results published by UBS since the acquisition, which were hastily arranged over a weekend. in March.

UBS also sounded an optimistic note on its short-term outlook. He added that the bank is seeing sentiment rising among its wealthy clients and expects strong financial markets to also boost the fees it earns.

However, the decision to absorb Credit Suisse’s domestic operations is disputed in Switzerland. Spinning off the Swiss bank instead would have avoided “a significant systemic risk to Switzerland, an important negative impact on employment and fair competition issues,” said proxy advisor Ethos, which represents Swiss pension funds and institutions that hold stakes in both banks.

Ethos backed a class action lawsuit seeking a better price from UBS for the acquisition.

Had Credit Suisse in Switzerland been sound and independent, as some politicians had hoped, fewer jobs would have been threatened.

The biggest banking merger since the global financial crisis, orchestrated by the Swiss state to avert the collapse of Credit Suisse, created its asset pool dwarfed by the country’s economic output, whose organizers were already struggling to control major lenders.

Although Switzerland funded the bailout with guarantees and central bank financing, UBS has since dropped state support, leaving its politicians with little leverage to avoid a lynching before national elections.

The cuts will be painful for the financial center of Zurich in Switzerland, where banks dominate the scene. The Swiss Bank Employees Association said the 37,000 local employees of the two banks should be treated fairly and on an equal footing.

gun marriage

The Swiss job cuts give a glimpse of more at the global bank, whose reach extends from Wall Street to London.

Most of the savings are set to come from staff cuts, and analysts estimate that 30,000 to 35,000 jobs could disappear globally.

Analysts welcomed the announcement, although many were cautious. Jefferies described the process of merging the two as “long, challenging and potentially difficult.” “The group remains a building site,” said Deutsche Bank analysts.

The results also showed the difficulties UBS faced in convincing Credit Suisse’s wealthy clients to stay.

Retaining it is seen as key if UBS is to pull off the blockbuster deal.

Credit Suisse announced net asset outflows of 39 billion Swiss francs ($44.4 billion) in the second quarter, confirming that the bailout failed to stem the loss of confidence.

But UBS said outflows slowed and reversed in June. UBS Global Wealth Management announced $16 billion in net new funds.

The quick marriage with its fallen rival — the first-ever merger between two global banks important to the financial system — has created both opportunities and risks for UBS.

Analysts point out that UBS acquired Credit Suisse for a song — just CHF3 billion — but to make it work, UBS must cut costs, trim Credit Suisse’s investment bank, and retain its wealthy clients.

UBS generated net income of $29 billion in the second quarter. UBS’s group-level results include just one month’s earnings from Credit Suisse as the deal only closed in June.

The bumper profit results from a huge one-time gain that reflects how the acquisition costs were far less than Credit Suisse’s value. This was somewhat lower than the consensus estimate of $33.45 billion from a survey by the bank.

($1 = 0.8784 Swiss francs)

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