UBS embarks on ‘bumpy’ integration of Credit Suisse

UBS said Monday that it had finalised the takeover of its former rival Credit Suisse, clearing the way for a Herculean task of integration that will be closely watched by clients, employees and Swiss political leaders.

The coming months are likely to be “bumpy”, UBS chief Sergio Ermotti had warned Friday, saying the government-orchestrated operation would require “waves” of difficult decisions, particularly regarding employment. “We have finalised the legal takeover of Credit Suisse,” the bank said in an open letter published in the NZZ newspaper, calling it “the beginning of a historic new chapter”.

UBS, the country’s leading bank, was forced into the marriage to prevent its rival from going under -- with potentially catastrophic consequences for the global financial system -- but it had not waited for Monday’s announcement to start preparing to absorb Credit Suisse.

“From Monday onward, UBS can start to be proactive,” Andreas Venditti, a financial analyst for Vontobel, told AFP.

UBS has been preparing since mid-March and already has an idea of what it wants to keep, close or sell, but had been “limited in what they could do” until the merger was sealed, Venditti said.

The merger of Switzerland’s two biggest banks will be complex both technically and politically, resulting in a megabank unlike the Swiss have ever seen -- a size that has political leaders worried. Thousands of jobs could be lost because of overlapping operations.

But according to Thomas Jordan, chairman of the Swiss National Bank, there was no other solution.

“Of course, it’s a pity there is only one (big bank) left. But I am sure that if the takeover by UBS hadn’t succeeded, there would have been an international financial crisis,” he said Sunday in an interview with the weekly Sonntagszeitung.

Credit Suisse risked collapse when its share prices plunged more than 30 per cent during trading on March 15, after three US regional lenders folded.

The Swiss government, the central bank and financial regulators stepped in and strongarmed UBS into a $3.25 billion takeover announced on March 19.

The deal includes guarantees for UBS in case there are any nasty surprises in the Credit Suisse cupboards.