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Top UBS executives defend their 'emergency rescue' of Credit Suisse. Here's what comes next.

CEO Ralph Hamers of Swiss bank UBS addresses the Annual Meeting of Swiss Financial Institute (SFI) in Zurich, Switzerland November 10, 2022.
"We will change. But we will not change that much. We will still be Swiss," Ralph Hamers, who has led UBS since late 2020, said Sunday.
Arnd Wiegmann/Reuters

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  • UBS sought to reassure investors that the Credit Suisse deal wouldn't disrupt long-term strategy.
  • UBS agreed to acquire Credit Suisse on Sunday in a deal arranged by the Swiss government.
  • Credit Suisse has faced crisis after crisis in recent years, from Archegos to a spying scandal.

On an hour-long call held late in the evening on Sunday in Zurich, top UBS executives who suddenly found themselves running the only large Swiss bank struck at times a solemn tone and sought to reassure analysts that the bank's swift takeover of Credit Suisse would not disrupt UBS's long-term strategy. 

"It's a historic day in Switzerland and a day, frankly, we hoped would not come," said UBS Chairman Colm Kelleher, who added that while the firm did not initiate takeover talks, the deal should "support earnings growth over time."

Earlier on Sunday the wealth management giant agreed to acquire Credit Suisse, its troubled Swiss competitor that has faced crisis after crisis in recent years, in an all-stock deal arranged by Switzerland's federal government, central bank, and main financial regulator known as Finma. Executives said that UBS will suspend its share buyback program and that the emergency nature of the deal meant the Swiss government brokered the deal without a shareholder vote. 

"We will change. But we will not change that much. We will still be Swiss," said Ralph Hamers, the chief executive of UBS. "We will be an even bigger wealth manager in the world. We will have an even bigger platform for investing where we want to bring leading wealth clients and institutional investors together. From that perspective, we're making a giant step in terms of our strategy to grow to what we once indicated to you as the aspiration to be a $6 trillion network for private money."

Max Georgiou, an analyst at London-based investment research firm Third Bridge, said Credit Suisse's wealth management business is a good fit for UBS's sprawling wealth business, which is known for catering to the ultra-wealthy and last year abandoned plans to buy robo-advisor Wealthfront.

Georgiou's team anticipates that UBS would likely move to "dispose of" Credit Suisse's investment banking business, he said. Credit Suisse said in a release on Sunday that it would accelerate a "radical restructuring" of its investment bank and sell a large part of its securitized products group to Apollo Global Management. 

"These events could alter the course of not only European banking but also the wealth management industry more generally," Georgiou said. "Our experts say the size of the merged entity provides significant pricing power but also brings potential new perceived concentration risks."

'An outcome we may not have hoped for'

Switzerland's central bank officially announced the acquisition after two intense days of news reports that UBS was considering a Credit Suisse takeover. The Financial Times reported on Friday that UBS was in discussions to acquire all or part of the bank.

The tie-up capped off a stunning period of banking crises around the world.

In the US, the startup-focused Silicon Valley Bank failed after venture capital investors started urging founders they backed to pull their money from the California bank. Signature Bank, a New York-based bank, also failed. The crypto-friendly bank Silvergate said it would shutter. And last Thursday, the largest US banks including JPMorgan, Bank of America, and Wells Fargo rescued First Republic with a $30 billion lifeline.

Kelleher, who joined UBS in April 2022 after a three-decade career at Morgan Stanley, said on Sunday that UBS aims to "de-risk and downsize Credit Suisse's trading operations" and will "manage the majority of this in a separate, non-core division." Kelleher has dealt with banking crises before — he was chief financial officer and co-head of corporate strategy at Morgan Stanley, which nearly went under during the global financial crisis, from 2007 to 2009. 

UBS will contend with absorbing a bank that has faced a string of crises, from its involvement in the blow-up of family office Archegos Capital Management, one of the Swiss bank's clients at the time, to an embarrassing spying scandal. In 2019, Credit Suisse found in an investigation that a top executive had ordered a colleague to spy on Iqbal Khan — who now runs wealth management at UBS. 

"It's an outcome that we may not have hoped for," Hamers said of the Credit Suisse deal. "But the transaction is strategic." 

Regulators in the US praised the Swiss deal. Treasury Secretary Janet Yellen and Jerome Powell, chair of the Federal Reserve, said in a joint statement on Sunday that they "welcome the announcements by the Swiss authorities today to support financial stability" and that they were in touch with their international counterparts on the deal. 

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