UBS, one of the largest wealth management banks in the world, has announced a bold cost-cutting plan that could save them more than $10 billion. The plan comes after UBS acquired Credit Suisse, and as part of the integration process, 3,000 jobs in Switzerland will be cut. This move gives a clear view of the immense scale of the shake-up that UBS is undertaking as it merges with a struggling competitor.
Analysts predict that globally, between 30,000 and 35,000 jobs may ultimately be eliminated as UBS seeks to streamline its operations. UBS CEO Sergio Ermotti believes that a full integration of Credit Suisse is the best outcome for UBS and the Swiss economy. The market seems to agree, as UBS shares soared by 6% following the announcement, reaching heights not seen since 2008.
However, not everyone is in agreement with UBS’s decision. Proxy adviser Ethos, representing Swiss pension funds and foundations, has voiced its dissent, supporting a class-action lawsuit seeking a better price for the credit Suisse takeover. Ethos believes that UBS should not absorb Credit Suisse’s local operation and should consider alternative strategies for the merger.
Despite the controversy, UBS remains confident in its cost-cutting measures. They predict that by the end of 2026, they will achieve over $10 billion in cost-savings compared to their previous estimate of $8 billion by 2027. This optimism is reflected in UBS’s impressive second-quarter net profit of $29 billion, largely attributed to a one-off gain from the acquisition of Credit Suisse.
However, merging with Credit Suisse does present challenges for UBS. Retaining Credit Suisse’s wealthy clients is a top priority, especially considering Credit Suisse reported net asset outflows of 39 billion Swiss francs in the second quarter. UBS will need to navigate this delicate task while also addressing the need to slash costs and reduce the size of Credit Suisse’s investment bank.
All in all, the merger of UBS and Credit Suisse presents both opportunities and risks for UBS. The bank is confident in its ability to enact significant cost-savings, but the road ahead will not come without its challenges. As the integration progresses, the true impact of the merger on UBS and the Swiss economy as a whole will undoubtedly become clear.
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