Mar 19, 2023
Credit Suisse’s 9,000 Job Cuts Are Foretaste of UBS Takeover
Even before Credit Suisse Group AG’s government-brokered takeover, the Swiss lender was in the process of cutting 9,000 jobs in an effort to save itself.
That’s only the beginning after rival UBS Group AG agreed to buy the troubled bank, according to people familiar with the discussions, with one person estimating the final toll could be a multiple of that number.
The merger creates significant overlaps. The two lenders together employed almost 125,000 people at the end of last year, with about 30% of the total in Switzerland.
UBS Chairman Colm Kelleher said it’s too soon to know a job-cut number, but UBS indicated it will be significant. The firm said in a statement Sunday it plans to cut the combined company’s annual cost base by more than $8 billion by 2027. That’s almost half of Credit Suisse’s expenses last year.
Kelleher said the firm was determined to keep Credit Suisse’s profitable Swiss unit, despite concerns about concentration in the domestic market from this deal. He was also clear that UBS is excited about Credit Suisse’s wealth management business, but less so about its investment bank. The investment bank will be shrinking, likely ending the dreams of a CS First Boston spinoff.
“Let me be very specific on this: UBS intends to downsize Credit Suisse’s investment banking business and align it with our conservative risk culture,” Kelleher said at Sunday’s press conference.
The UBS chairman said he understood the coming months would be “difficult” for Credit Suisse staff and promised UBS will do what it can to keep the uncertainty as short as possible.
Credit Suisse told staff in an internal memo it will work to identify which roles might be impacted, and “will aim to continue to provide severance in line with market practice.” There will be no changes to payroll arrangements and bonuses will still be paid on March 24, the memo said. A spokeswoman confirmed the contents of the memo.
“We know that many of you will have been following the intense media coverage over the past 48 hours on the future of Credit Suisse and appreciate the enormous uncertainty and stress that this has caused,” Credit Suisse Chairman Axel Lehmann and Chief Executive Officer Ulrich Koerner said in a separate memo.
Credit Suisse said it doesn’t anticipate any changes to any agreed on upfront cash awards and will also pay the cash component of the “transformation award” that had been communicated earlier. It will confirm any impact on the equity component.
Under the deal, Kelleher and UBS Chief Executive Officer Ralph Hamers will retain their roles in the combined entity. A representative for FINMA, the Swiss regulator, said at the press conference that Credit Suisse’s management will stay in place until the deal closes. Then, their future becomes a decision for UBS.
Hamers told staff not to talk about business matters with counterparts at Credit Suisse.
“Please remember that, until this deal closes, Credit Suisse is still our competitor,” Hamers wrote in a memo to employees. A spokesperson for UBS didn’t immediately respond to an email seeking comment on the memo.
In Asia, where the two firms rank among the largest wealth managers, the deal carries the risk that clients who currently have money with both firms move part of it to a competitor to avoid having too much exposure to a single firm.
Credit Suisse Chief Executive Officer Ulrich Koerner said Tuesday he had already cut about 8% of headcount.
--With assistance from Christian Baumgaertel and Denise Wee.
(Updates with UBS staff memo from 12th paragraph.)
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