UBS set to complete Credit Suisse takeover, creating $1.6tn Swiss banking giant

Today, UBS announced its expectation to finalise the acquisition of Credit Suisse by June 12, forming a colossal Swiss bank with a US$1.6 trillion balance sheet. The completion of the takeover is contingent on the registration statement being declared effective by the US Securities and Exchange Commission and other remaining closing conditions.

“UBS expects to complete the acquisition of Credit Suisse as early as June 12. At that time, Credit Suisse Group AG will be merged into UBS Group AG,” stated UBS.

Switzerland’s leading bank agreed on March 19 to pay 3 billion Swiss francs (US$3.37 billion) and take on up to 5 billion francs in losses for its smaller Swiss rival. The collapse in customer confidence brought Credit Suisse to the edge of collapse, prompting Swiss authorities to intervene to prevent a broader banking crisis.

Upon completion, Credit Suisse shares and American Depositary Shares (ADS) will be delisted from the SIX Swiss Exchange (SIX) and the New York Stock Exchange (NYSE). SIX announced in a separate statement that Credit Suisse shares would be delisted on June 13 at the earliest.

Under the all-share takeover, Credit Suisse shareholders will receive one UBS share for every 22.48 shares they held.

The most significant bank deal since the global financial crisis will create a group overseeing US$5 trillion of assets, granting UBS an overnight leading position in key markets that would otherwise require years to grow in size and reach.

The mega-bank will employ 120,000 worldwide, although it has already announced job cuts to take advantage of synergies and reduce costs.

UBS had been working quickly to close the transaction, aiming to provide greater certainty for Credit Suisse clients and employees and prevent departures.

The deal was supported by 200 billion francs in liquidity from the Swiss central bank and the government’s commitment to absorb up to 9 billion francs in losses in addition to those borne by UBS.

“We have to be also clear … this is an acquisition not a merger,” UBS CEO Sergio Ermotti told a financial conference on Friday, warning of “painful” cost and job cuts to come.

A question mark remains over what UBS will do with Credit Suisse’s Swiss retail bank, long seen as the group’s “crown jewel”. Integrating it into UBS and combining the two banks’ largely overlapping networks could produce significant savings.

However, there has been public pressure to preserve Credit Suisse’s domestic business as a separate entity with its own brand, identity, and workforce.

Ermotti stated on Friday that the bank was still analysing the situation, although the “base scenario” remained a full integration with UBS, and he would not be swayed by “nostalgia” when deciding how to proceed.

The executive, who was brought back to UBS to steer the takeover, dismissed concerns that the new bank would be too big for Switzerland, arguing that although the scale was important for banks, smaller institutions could also cause problems.

Overall, Ermotti was optimistic about the challenges ahead, reports Channel News Asia.

“I am convinced this is going to be a great story not only for our shareholders and employees but also for our clients and for the financial services industry in Switzerland,” he said yesterday.