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UBS embarks on ‘bumpy’ integration of Credit Suisse

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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.

– ‘Talent retention’ –
Credit Suisse risked collapse when its share prices plunged more than 30 percent 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.

UBS and the Swiss government signed the guarantee contract on Friday, which can reach up to nine billion Swiss francs ($9.85 billion), if the losses exceed five billion francs.
Many questions surrounding the merger remain unanswered, but Venditti said the picture should be clearer after second-quarter financial results emerge.

UBS has pushed the publication date back by more than a month to August 31.

Ipek Ozkardeskaya, an analyst at Swissquote Bank, said “talent retention” would be one of the biggest challenges, as staff departures multiply in the face of downsizing fears.

From the political standpoint, the financial regulators FINMA “should make sure to protect competition, which could necessitate an eventual spin-off of certain business units”, Ozkardeskaya told AFP.

The government and the central bank released about 259 billion Swiss francs of liquidity to facilitate the takeover.

“We owe it to the youth of this country to ensure that such a crisis cannot happen again,” Damien Cottier, the parliamentary leader of the centre-right Liberals party, said in the National Council lower chamber on Wednesday.

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