UBS CEO Sergio Ermotti addressed critics’ concerns about the size of the bank’s balance sheet, asserting that the acquisition of Credit Suisse had not only made UBS larger but also stronger.
This merger, orchestrated by Swiss authorities ten months ago, was a crucial move to prevent the collapse of Credit Suisse, marking the most significant bank merger since the global financial crisis.
The integration of these two rival financial giants is a massive, multi-year undertaking, expected to result in thousands of job losses both in Switzerland and abroad.
The combined entity will boast a balance sheet approximately double the size of Switzerland’s economy. Ermotti acknowledged the concerns but emphasized that the new UBS represented a low-risk, highly focused business model when considering risk-weighted assets as a percentage of GDP or their overall balance sheet.
Speaking at the World Economic Forum in Davos, Ermotti stated that the acquisition of Credit Suisse, which had propelled UBS shares to a 50% increase, could potentially be the “deal of the century.”
However, he emphasized that the success of the merger hinged on the smooth integration process.
He reiterated that while UBS had become larger, it had also become stronger and more diversified, underscoring that this transformation was not without challenges.
UBS Chairman Colm Kelleher weighed in on the matter as well, suggesting that once the integration is complete, the bank’s return on equity might surpass its target of 15% by the end of 2026.
He also addressed concerns about the cultural compatibility of the two organizations, noting that many problematic individuals had already departed and that the integration of new talent had generally been successful.
During a panel discussion at the Davos event, Ermotti was asked if UBS had been “forced” to acquire Credit Suisse. Ermotti responded with a light-hearted remark, stating that they had been asked to consider it, eliciting laughter from the audience.
In the coming month, Switzerland’s largest bank is set to unveil a three-year strategic plan in February, coinciding with its fourth-quarter results.
On the day of the announcement, UBS shares saw a 1.2% drop, consistent with the overall weakness in bank shares across European stock markets.