Swiss bank UBS on Monday said it completed its emergency takeover of embattled local rival Credit Suisse, the biggest banking deal since the 2008 global financial crisis, creating a giant bank with a balance sheet of $1.6 trillion.
UBS CEO Sergio Ermotti and Chairman Colm Kelleher said, “This is the start of a new chapter – for UBS, Switzerland as a financial centre and the global financial industry,” in an open letter published in Swiss newspapers.
The mega group will oversee $5 trillion of assets giving UBS, the world’s largest wealth manager, a leading position in key markets it would otherwise have needed years to grow in size and reach.
Swiss financial regulator FINMA has specified the central elements of its regulatory requirements for the merged UBS and Credit Suisse, it said. The regulator also said it “welcomes UBS’s strategic focus, which foresees a rapid reduction of risk in investment banking.”
A string of scandals over many years, top management changes, multi-billion dollar losses and an uninspiring strategy can be blamed for the mess that the 167-year-old Swiss lender now finds itself in.
On Friday, UBS and the Swiss government signed the guarantee contract which can reach up to nine billion Swiss francs ($9.85 billion), if the losses exceed five billion francs.
On March 15, Credit Suisse collapse appeared more prominently when its share prices plunged more than 30 per cent during trading after three US regional lenders folded.
On March 19, Swiss government, central bank and financial regulators stepped in and strongarmed UBS into a $3.25 billion takeover.
The mega-merger includes guarantees for UBS in case there are any nasty surprises in the Credit Suisse cupboards.
Credit Suisse confirmed in February that clients had pulled 110 billion Swiss francs ($119 billion) of funds in the fourth quarter while the bank suffered its biggest annual loss of 7.29 billion Swiss francs since the financial crisis. In December, Credit Suisse had tapped investors for 4 billion Swiss francs.
The sell-off in Credit Suisse’s shares began in 2021, triggered by losses associated with the collapse of investment fund Archegos and Greensill Capital.
In January 2022, Antonio Horta-Osorio resigned as chairman for breaching COVID-19 rules, just eight months after he was hired to fix the ailing bank.
In July, new CEO and restructuring expert Ulrich Koerner unveiled a strategic review – but failed to win over investors. An unsubstantiated rumour on an impending failure of the bank in the autumn sent customers fleeing.
With inputs from Reuters
