By-product of CS Switzerland: This is for him, this is against him

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At first, it was said that UBS was making preparations for the IPO of CS Switzerland. Shortly after, “Bilanz” wrote that a split was “not an option”. UBS CEO Sergio Ermotti (62) seems annoyed that the rumors are spreading so wildly. On the occasion of the presentation of the quarterly figures, “At the moment there are many voices in favor of merger and not everyone is well informed.” said. According to Ermotti, the decision about the bank’s future will be based on “facts rather than feelings.”

Blick sees this as an opportunity for a fact-check: What are the pros and cons of disabling CS’ Swiss business as part of a bank takeover?

Credit Suisse has approximately 17,000 employees and 97 bank branches in Switzerland. If fully integrated into UBS, there will be duplications that will be eliminated in terms of efficiency. It is unclear how many jobs will disappear as a result. There will be thousands. On the other hand, many of these businesses will also be retained if CS remains in the market as its own bank.

While layoffs are a nightmare for unions and employees, they resonate with shareholders. Full integration of CS into UBS creates synergy effects that extended UBS can benefit from: for example, you can deal with more customers and manage more assets with a single IT system. This reduces costs and increases profitability.

Credit Suisse was a force in the Swiss market when it came to corporate client business such as lending. If completely absorbed by UBS, SMEs can practically only choose between UBS and Zürcher Kantonalbank (ZKB).

International competitors are likely to commit the breach: Deutsche Bank of France or BNP Paribas could expand their business in Switzerland.

A spin-off from CS Switzerland can counter this. But if CS was truly independent. “I wish the brand would stay, but still be owned by UBS,” says economic historian Tobias Straumann, 57, at best.

From the shareholders’ point of view – and as a public company UBS has an obligation to them – it is desirable to be the sole leader in the corporate client business in Switzerland. Why give up that advantage by ditching the Swiss CS business and creating a competitor for yourself?

It is estimated that UBS could bring in CHF 10 to 15 billion if it splits its Swiss CS business and goes public. A big win considering it got all of CS at a bargain price of just $3 billion. UBS can reinvest the money and distribute it to its shareholders.

The Swiss business is considered Credit Suisse’s pearl – what is left after you sell it? Just old issues, according to critics of a spin-off. However, it is doubtful whether the Swiss CS business, even fully integrated into UBS, would still be equally profitable, or whether it could move quickly from fillet to schnitzel. Many customers may opt out of full integration because they are already UBS customers and want to diversify their investments.

Following CS’ takeover, UBS’s massive size raises concerns: What if it gets in trouble again? “With the division of CS Switzerland, UBS will shrink and thus automatically withdraw from the line of fire,” says economic historian Tobias Straumann. Politicians would probably welcome a split. Additionally, a split would save thousands of jobs in Switzerland – politicians would also take a benevolent perspective to it. The happier the politicians, the less regulatory frenzy.

The split sounds simple, but it isn’t at all. The Swiss bank is intertwined with CS’ international wealth management, wealth management and investment banking operations. It works on the same IT systems and must first be separated from this structure. This is expensive and takes a long time. UBS plans to complete the CS acquisition this month. However, regardless of whether CS Switzerland is split or integrated, the job only begins when the transaction is complete.

Source :Blick