UBS and Credit Suisse merge into giant larger than Deutsche Bank

UBS Group, Switzerland’s largest bank, announced on Sunday (19) that it has agreed to buy Credit Suisse for US$3.24 billion. The combined companies will manage more than US$1.5 trillion in invested assets.

UBS indicated that it plans to reduce the number of employees at Credit Suisse, which has about 1,000 employees in Brazil and 50,000 worldwide but did not specify the size of the cut.

UBS President Colm Kellenher said the new period would be “difficult for employees” at Credit Suisse.

“We will try to make this period of uncertainty as short as possible,” he said at a press conference with members of the Swiss government.

Kellenher assured that after this operation, his bank will remain “solid as a rock” and that his strategy in this new stage will be to “increase our capital.”

Among the details he offered, Kellenher said he would reduce the size of Credit Suisse’s investment banking unit, which has given the most trouble in recent years and has been involved in several scandals that have tarnished its reputation.

This investment banking “will represent no more than 25% of the bank’s assets,” he said.

The UBS president also indicated that Credit Suisse First Boston, the bank’s investment bank incorporated in the United States, will continue to operate.

“We are committed to making this transaction a great success,” the executive said.

In a statement posted on its website, UBS said that “the acquisition will further strengthen UBS’ position as the leading Swiss wealth manager, with more than US$3.4 trillion in combined invested assets, operating in the most attractive growth markets.”

Kelleher called the Credit Suisse purchase an “emergency rescue.”

“This acquisition is attractive to UBS shareholders, but let’s be clear, as far as Credit Suisse is concerned, this is an emergency rescue.”

“We have structured a transaction to preserve the amount spent on the deal, limiting our negative exposure.”

“The acquisition of Credit Suisse’s capabilities in wealth management, asset management, and Swiss universal banking services will enhance UBS’s strategy of expanding its capital-light business.”

MOST SIGNIFICANT BANK MERGER SINCE THE FINANCIAL CRISIS

The merger decision was preceded by days of marathon negotiations involving the parties involved in the two banks and top representatives of politics and supervisory authorities.

In the process, UBS and Credit Suisse had been urged by politicians and regulators to merge.

The Swiss Federal Council also held several meetings over the weekend on the Credit Suisse situation.

UBS’s takeover of Credit Suisse is Europe’s most significant bank merger since the financial crisis 15 years ago.

It will create one of Europe’s largest systemically important financial institutions – larger than Deutsche Bank.

Credit Suisse is one of the world’s largest asset managers and is one of the 30 global systemically important banks whose failure would shake the international financial system.

“The takeover of Credit Suisse by UBS has provided a solution in this extraordinary situation to safeguard financial stability and protect the Swiss economy,” it said.