UBS to axe 3,000 employees as it integrates Credit Suisse
UBS Group will eliminate 3,000 jobs in Switzerland over the next couple of years. This is part of its strategy to achieve over $10 billion in cost savings following its acquisition of Credit Suisse. The job cuts will stem from the integration of Credit Suisse's domestic bank and company restructuring. CEO Sergio Ermotti stated that a full integration will be the best outcome for UBS, its stakeholders, and the Swiss economy.
Credit Suisse acquisition presents opportunities and risks
The acquisition presents opportunities as well as risks for UBS. On the positive side, the bank gained a substantial asset base, strong client relationships, and skilled employees at a low cost. However, the complexity and rapid nature of the deal bring significant execution risks. UBS reported a second-quarter net profit of $29 billion, partially due to a one-time gain from the acquisition.
Managing outflows amid Credit Suisse integration
Credit Suisse experienced net asset outflows worth 39 billion Swiss francs ($44.4 billion) in the second quarter. To retain clients and manage outflows, UBS has to aggressively cut jobs, lower Credit Suisse's investment banking deals, and spread risk. UBS's global wealth management has reported a net new investment of $16 billion. This is its highest for the second quarter in over a decade.
Profit for first combined UBS-Credit Suisse quarter is $1.1 billion
On a related note, UBS posted the highest quarterly profit for a bank in the second quarter because of Credit Suisse's takeover. The $29 billion profit has been derived from the accounting difference between the value of Credit Suisse's balance sheet and the $3.8 billion UBS paid for the acquisition of Credit Suisse. Also, the underlying profit for the first combined UBS-Credit Suisse quarter stands at $1.1 billion.
