UBS Group (UBSG.S) has initiated an ambitious plan to reduce costs by over $10 billion, announcing a significant reduction of 3,000 jobs in Switzerland following its acquisition of troubled rival Credit Suisse.
This move, which equates to around one in twelve Swiss jobs, provides insight into the extensive restructuring at the newly amalgamated banking powerhouse.
The integration process aims to address the aftermath of a crisis that saw panicked customers withdrawing tens of billions from Credit Suisse.
The strategic decision to absorb Credit Suisse’s profitable local division rather than divesting it, as initially contemplated, has been embraced by UBS.
Sergio Ermotti, Chief Executive, emphasized the merits of full integration for both UBS and the Swiss economy, solidifying UBS’s position as the largest wealth manager globally.
In a memo to employees, Ermotti revealed that 3,000 Swiss positions would be eliminated, while other departures would occur naturally through retirements and other voluntary means.
On a global scale, 8,000 Credit Suisse employees have already left during the first half of the year.
UBS’s projected cost savings surpass $10 billion by the end of 2026, a figure higher than the previous estimate of $8 billion by 2027.
This announcement spurred a more than 5% rise in UBS shares during early afternoon trading, marking the highest levels since 2008.
The unveiling of these cuts coincided with UBS’s publication of its first financial results post-acquisition.
In addition to the cost-saving measures, UBS expressed optimism regarding its short-term prospects.
Anticipated improvements in sentiment among high-net-worth clients and stronger financial markets are expected to bolster the bank’s fee earnings.
Nevertheless, the decision to assimilate Credit Suisse’s local division has generated contention within Switzerland.
Ethos, a proxy adviser representing Swiss pension funds and foundations invested in both banks, argued that divesting the Swiss bank would have circumvented systemic risks and negative impacts on employment and fair competition.
Ethos has lent its support to a class-action lawsuit seeking better terms for UBS’s acquisition.
The merger of UBS and Credit Suisse, orchestrated by the Swiss government to avert a Credit Suisse collapse, resulted in a banking conglomerate with assets surpassing the country’s economic output.
The integration process has proceeded without continued state support, placing Swiss politicians in a limited position to influence the restructuring.
The forthcoming job cuts, which disproportionately affect Zurich’s financial hub, foreshadow broader changes at the global bank, with estimates of 30,000 to 35,000 positions being eliminated worldwide.
Analysts view the announcement positively, although they acknowledge the challenges of integrating two major banks.
The progress is expected to be gradual and potentially challenging. UBS has grappled with retaining Credit Suisse’s affluent customers, a crucial element for the deal’s success.
While UBS posted a net profit of $29 billion for the second quarter, the complex integration strategy and retention of clients remain central to ensuring the merger’s success.