UBS Acquisition of Credit Suisse: A $5tn Mega-Bank with a Massive Job Cut Plan

Highlights

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• UBS plans to acquire Credit Suisse, creating a $5tn mega-bank dominating the European financial sector.
• The deal has raised concerns about its impact on jobs, competition, and executive pay.
• UBS plans to cut up to 36,000 jobs worldwide after completing the takeover, reducing the combined workforce by as much as 30%.
• This would make UBS the company with the largest job cuts globally in the past six months, surpassing tech giants like Amazon and Meta.
• The job cuts will affect both investment banking and wealth management divisions, as UBS seeks to eliminate duplicate roles and achieve cost synergies.
• Some employees may be poached by other leading banks such as Deutsche Bank, Citigroup, and JPMorgan Chase, while others may face an uncertain future in a competitive and volatile market.

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The Swiss banking giant UBS has recently announced its intention to acquire its long-time rival Credit Suisse, creating a $5tn mega-bank that would dominate the European financial sector. However, the deal has also raised concerns about its impact on jobs, competition, and executive pay.

According to a report by the Swiss newspaper SonntagsZeitung, UBS plans to cut as many as 36,000 jobs worldwide after completing the takeover, which would reduce the combined workforce by as much as 30%. This would make UBS the company with the largest job cuts globally in the past six months, surpassing tech giants like Amazon and Meta, which have also slashed thousands of jobs amid a changing economic landscape.

The job cuts are expected to affect both investment banking and wealth management divisions, as UBS seeks to eliminate duplicate roles and achieve cost synergies. Some of the employees may be poached by other leading banks, such as Deutsche Bank, Citigroup, and JPMorgan Chase, while others may face an uncertain future in a competitive and volatile market.

The merger was quickly arranged by the Swiss government on March 19, in response to concerns about the potential for a global financial crisis following the collapse of Silicon Valley Bank (SVB), a major lender to tech startups and venture capitalists. SVB's failure exposed the vulnerabilities of banks with high interest-rate risk and sparked a wave of panic selling and credit crunches across the sector.

While UBS and Credit Suisse were not directly affected by SVB's demise, they faced pressure from regulators and investors to strengthen their balance sheets and reduce their exposure to risky assets. The Swiss government saw an opportunity to create a national champion that could compete with global rivals and safeguard the stability of the Swiss financial system.

However, not everyone is convinced that the merger is in the best interest of shareholders, customers, and employees. At UBS's annual general meeting on April 5, some investors voiced their opposition to the deal, citing worries about inflated executive pay, reduced competition, and social consequences.

They urged UBS's bosses to avoid hiking their salaries and bonuses after taking over Credit Suisse, saying that the current plan was already extremely generous. They also warned that the mega-bank could harm competition in the Swiss mortgage market and other segments, and suggested that UBS should consider spinning off some of Credit Suisse's assets in the future.

Moreover, they expressed sympathy for the thousands of workers who could lose their jobs as a result of the merger, saying that banking is about people and not just numbers. They asked UBS's management to be transparent and fair in their decisions and to minimize the negative impact on employees and communities.

UBS's chair Colm Kelleher defended the takeover, saying that it was a historic and significant milestone for both banks and for Switzerland. He acknowledged that the deal came with risks but also with opportunities for growth and innovation. He said that UBS was not ruling out any options for the future of Credit Suisse's assets, including a possible split or spin-off.

He also apologized for failing to communicate better with shareholders and stakeholders about the rationale and benefits of the merger. He said that UBS was committed to engaging with them and addressing their concerns in a constructive way.

The merger is expected to be completed by June 2023, subject to regulatory approvals and shareholder votes. Until then, UBS and Credit Suisse will continue to operate as separate entities under their existing brands and structures.