Now the process of a possible merger of the two largest Swiss banks is at an initial stage: the chairman of the board of directors of UBS Axel Weber invited consultants to check its feasibility, but so far he has not even discussed it either with his directors, much less with the management of Credit Suisse. However, due to the size of the banks and the importance of the merger and the formation of a new financial giant in the banking sector, the news spread to the front pages of the media and news agencies.
The merger, if it happens, of course, will take place at a difficult time for both Swiss banks. Both UBS and Credit Suisse are undergoing a leadership change. Credit Suisse CEO Urs Rohner is leaving his post next year. Ralph Hamers from ING joined UBS in September. He is due to replace Sergio Ermotti as CEO in November. Credit Suisse changed CEOs back in February: Thomas Gottstein replaced Tijan Thiam in this position. The reason for this change was a high-profile corporate spy scandal.
In addition, both banks are forced to cut costs due to the crisis caused by the pandemic. By the way, it was the pandemic and the associated crisis that strongly contributed to the outbreak of interest in Europe in recent months to strengthen and consolidate the banking sector.
Despite the absence (so far) of negotiations, the likelihood of a merger between UBS and Credit Suisse is quite high. The idea of a merger between two Swiss financial heavyweights has been around for years. However, the matter did not go further than conversations in the offices of top managers, because there are serious concerns about the support of financial regulators. The deal looks questionable on the grounds that it violates Swiss antitrust laws.
On the other hand, European financial regulators have recently been less strict about compliance with this legislation than they used to. They are quite ready to turn on the green light even for rather dubious M&A deals in the financial sector of the Old World to support banks in difficult times and help them survive. Low key rates and expected losses from the pandemic only contribute to the popularity of such deals.
If we talk about losses and problems, then this year, Credit Suisse has lost 22% of its value, while UBS has lost 8%. However, on Monday, following news of a potential merger, both banks rallied in value: Credit Suisse rallied 4% and UBS rallied 2.5%. The Swiss blog Inside Paradeplatz was the first to report a possible merger.
Both banks have slightly changed their core business in recent years and focus on Asian clients. Both Credit Suisse and UBS now refer to themselves as wealth management financial institutions. As for their main type of activity вЂ” investments, now there are problems with it, caused by strong competition from American banks.