So UBS will eat and digest CS

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Since the bargain buyout of Credit Suisse, UBS President Colm Kelleher, 65, has every reason to smile. But that joy must end soon: CS for UBS is one big bite to choke on. Blick shows the most important stages of the bank takeover – including the stumbling blocks.

UBS must first decide which areas to integrate. “The client needs to decide whether he wants to merge his business or manage two brands,” says Daniel Michels, 48, head of the Competence Center for Mergers and Acquisitions at the University of St.

According to media reports, UBS will be considering an IPO for its CS Switzerland business. However, the Credit Suisse brand will exist for at least another three to four years, as well-informed circles in the financial scene have revealed to Blick.

When two large banks merge, the primary goal is to save costs. IT systems, structures and products are combined. Thousands of jobs will disappear. According to a senior executive, the new UBS is targeting layoffs of between 20 and 30 percent. More than 10,000 jobs may be interrupted in Switzerland alone. Due to conflicts, many offices around the world will become redundant. In Switzerland alone, with 75 UBS branches, there is a CS branch almost around the corner.

It sounds simple: where the duplication is, it is deleted. But Arturo Bris, 56, a finance professor at IMD, a private business school in Lausanne, says such processes are anything but a sure success: “Mergers often fail in the implementation phase.” And even if they work, they often fail to deliver on their promises. Bank mergers often even result in lost profits.

From the very beginning, UBS had to integrate CS’ management teams: Arturo Bris says this has to go hand in hand with the dismissals of many CS senior executives, particularly in investment banking. Two very different cultures of risk clash in CS and UBS. UBS management has already announced that they will take a close look at CS employees. He doesn’t want to bring CS culture into his home – because the lack of risk awareness has cost CS billions.

But many CS talents are at risk of missing out if CS culture disappears altogether, Bris says. In addition, employee motivation can suffer if integration leads to undesirable drops.

UBS must ensure that the costs of the integration process do not spiral out of control. “There are two main cost blocks: IT and staff,” says Daniel Michels. Mergers of this magnitude cost billions of Swiss francs.

IT is one of the biggest challenges. “A bank itself is nothing more than a gigantic IT device,” says Michels. CS customers’ data can be exported to UBS, making CS systems redundant. Technically, this would be easy to implement. However, Finma and foreign supervisory authorities will monitor compliance with numerous regulatory requirements. “This complicates the situation,” says Michels.

Integration teams are concerned with an efficient merger. “150 people are coming together quickly from both sides. And then there are the external ones,” explains Michels. A contact person is required for all the different functions and numerous markets of banks.

So-called “clean teams” can also be deployed. These are outsourced teams of experts who look at the other company’s books first and foremost. They can isolate high-risk CS businesses or prepare for the sale of CS parts. According to Arturo Bris, full integration should take three to five years.

After all, good communication is the beginning and end of everything for integration, says Arturo Bris. CS is not exactly known for that. Now it’s up to UBS to do better. I wish all CS customers could be informed about any regulation – for example a possible system change in e-banking.

Source :Blick