Economy

UBS to cut 3,000 Swiss jobs as it slashes costs by $10 billion













ZURICH — UBS Group plans to cut 3,000 jobs in Switzerland in the next couple of years, as it offered the first glimpse of how it plans to achieve more than $10 billion in cost savings after taking over Credit Suisse.

UBS also announced it would be keeping Credit Suisse’s domestic bank — and the ensuing job losses are expected to result in a backlash in Switzerland.

The world’s largest wealth manager could have spun off the business and floated it in an initial public offering but the domestic bank has been a solid profit-maker for Credit Suisse and last year it was the only division in the black.

“Our analysis clearly shows that a full integration is the best outcome for UBS, our stakeholders and the Swiss economy,” Chief Executive Sergio Ermotti said in a statement.

He wrote in a memo to staff to said that 1,000 jobs redundancies will result from integrating Credit Suisse’s domestic bank, while another 2,000 would result from the need to profoundly restructure Credit Suisse.

The prediction of over $10 billion in cost-savings by end 2026 compares with an earlier estimate of $8 billion by 2027. Most savings are set to come from reducing headcount.

Hanging on to existing Credit Suisse clients is seen as key if UBS is to successfully pull off the Herculean deal.

Credit Suisse reported net asset outflows of 39 billion Swiss francs ($44.4 billion) in the second quarter, underscoring that the rescue has failed to stem the loss of confidence in its franchise.

But UBS said the outflows took place at a slower pace compared with previous quarters and turned positive in June.

UBS’ global wealth management reported net new money of $16 billion, its highest for the second quarter in over a decade.

The shotgun marriage to its fallen rival at the behest of Swiss authorities — the first-ever merger of two global systemically important banks — has created both opportunities and risks for UBS.

On one hand, analysts note that UBS acquired Credit Suisse for a song — just three billion Swiss francs — while gaining a large asset base, good client relationships and talented employees.

At the same time, analysts warn that the complexity and the hasty nature of the deal brings significant execution risks as UBS must aggressively cut jobs, shrink Credit Suisse’s investment banking operations and manage outflows as clients seek to spread risk.

UBS booked net profit of $29 billion for the second quarter. Groupwide UBS results include just one month of Credit Suisse earnings as the deal only closed in June.

The bumper profit is due to a huge one-off gain that reflects how the acquisition costs were far below Credit Suisse’s value. It was somewhat under a consensus estimate of $33.45 billion from a poll conducted by the bank. — Reuters

Neil Banzuelo




Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Most Popular

Your daily news source covering investing ideas, market stocks, business, retirement tips from Wall St. to Silicon Valley.

Disclaimer:

TheProficientInvestor.com, its managers, its employees, and assigns (collectively "The Company") do not make any guarantee or warranty about what is advertised above. Information provided by this website is for research purposes only and should not be considered as personalized financial advice.
The Company is not affiliated with, nor does it receive compensation from, any specific security. The Company is not registered or licensed by any governing body in any jurisdiction to give investing advice or provide investment recommendation. Any investments recommended here should be taken into consideration only after consulting with your investment advisor and after reviewing the prospectus or financial statements of the company.

Copyright © 2021 TheProficientInvestor. All Rights Reserved.

To Top