Credit Suisse Group AG may be due for a “massive downsizing” of its investment banking businesses after its takeover by UBS Group AG, Chief Executive Officer Sergio Ermotti said in an opinion piece published over the weekend.
UBS went through similar steps in Ermotti’s earlier tenure, the CEO wrote in Swiss newspaper Tages-Anzeiger on Saturday. He said that the firm had simplified its structure and that a “prudent corporate culture” is at the core of everything they do.
“These strategic adjustments, which we will now also implement for Credit Suisse, will reduce the risks of the combined bank for Switzerland,” he added.
The fusion of the two financial giants is underway with the takeover formally closing last week, almost three months after the Swiss government brokered the $3 billion deal to prevent a collapse of Credit Suisse. UBS executives including Chairman Colm Kelleher have made clear that remaining Credit Suisse bankers would be put through a “culture filter” to weed out undesirable practices from the acquired bank.
As part of the deal, the Swiss government agreed to a 9 billion Swiss franc ($10 billion) guarantee to cover potential losses on certain Credit Suisse assets. While Ermotti has said it’s “exceptionally unlikely” that the guarantee will be needed, securing the state backing helps UBS maintain market confidence while it undergoes the transition.
The CEO has declined to comment on figures for potential job cuts, saying earlier this month “that’s the toughest part of the task,” though it’s needed to reduce costs. He has said that about 10% of Credit Suisse employees had left the bank in the past few months.
“The task ahead is demanding and takes time, and difficult decisions must be made,” he wrote on Saturday. “It requires focus, humility and open communication.”
UBS has already culled a slew of top Credit Suisse executives. High-profile departures include Credit Suisse Chief Financial Officer Dixit Joshi and co-head of the investment bank David Miller. Only a fifth of the 160 leadership positions in the combined bank are coming from Credit Suisse, according to a UBS spokeswoman.
Ermotti also wrote that “the question of what will happen to Credit Suisse’s Swiss business warrants careful consideration.”
Originally, UBS planned to fully integrate the local unit but later backtracked, with Ermotti saying that all options were on the table, including sale or spinoff. At a meeting last week, Ermotti said a combination with UBS’s domestic business was the “base case scenario,” the Financial Times reported Saturday, citing people who were present.
UBS said it would make a decision in the third quarter of this year.
Touching on the political debate which the takeover spurred in Switzerland — including a historic probe by parliament — Ermotti wrote that “while there are important lessons to be learned from the recent crisis, we should refrain from quick fixes.”
He said that he supports a “360-degree investigation” into which parts of banking regulation worked and which didn’t, but added “confidence and profitability cannot be brought about by regulation.”
This article was provided by Bloomberg News.