Embattled Credit Swisse embarked on a rescue mission with plans to lay off 9,000 staff ahead of the government-brokered takeover.The bank, which is among 30 banks worldwide, is poised to fail. Its share price slumped on Wednesday, Bloomberg reported.
The rival UBS Group agreed to buy the troubled bank. The merger creates significant overlaps. The two lenders together employed almost 125,000 people at the end of last year, with about 30 per cent of the total in Switzerland.
Though UBS Chairman Colm Kelleher said it’s too soon to know a job-cut number, UBS hinted it would be significant. In a statement on Sunday, the firm said it plans to cut the combined company’s annual cost base by more than US$8 billion by 2027. That’s almost half of Credit Suisse’s expenses last year.
Kelleher, who admitted that UBS is excited about Credit Suisse's wealth management, also affirmed that the firm was determined to keep Credit Suisse’s profitable Swiss unit, despite concerns about concentration in the domestic market from this deal.
He, however, sounded less optimistic 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 hinted that the coming months would be “difficult” for Credit Suisse staff and promised UBS would do what it could to keep the uncertainty as short as possible.
Kelleher and UBS Chief Executive Officer Ralph Hamers will retain their roles in the combined entity.
According to reports, 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 will move part of it to a competitor to avoid having too much exposure to a single firm.