UBS's plan for Credit Suisse jobs
UBS is acquiring Credit Suisse for CHF0.50 a share. Credit Suisse bankers and traders will still lose money on their deferred bonuses, but those losses will be limited to around CHF300m instead of the CHF600m they would have foregone at the initial offer of CHF0.25 a share. Good news!
The real question now though is what happens to Credit Suisse jobs, particularly at the investment bank. And, most particularly, what happens to Michael Klein's plan to spin out most of the investment bank in the form of Credit Suisse First Boston?
Credit Suisse bankers in the dark about their jobs
Senior insiders at Credit Suisse say they've had no news beyond an email which suggests the UBS deal won't close until next year. "The implication is that it's business as usual for the next few months, although no one really knows what's going on," one Credit Suisse managing director tells us.
Credit Suisse's press release relating to the merger confirms that the deal is not expected to close until the end of 2023, and states that, "until consummation of the merger, Credit Suisse will continue to conduct its business in the ordinary course and implement its restructuring measures in collaboration with UBS." The release adds that,"UBS has expressed its confidence that the employment of the staff of Credit Suisse will be continued." However, it also says that "UBS is expected to appoint key personnel to Credit Suisse as soon as legally possible," which doesn't sound promising for senior UBS bankers.
UBS's communications on Credit Suisse jobs are more revelatory. Credit Suisse employees are being welcomed, but not universally.
UBS to Credit Suisse employees: Welcome, but there will be job cuts
"We understand that this is not an easy situation for Credit Suisse employees, but we would like to stress that we look forward to welcoming our new employees," said UBS chairman Colm Kelleher, speaking on today's analyst call.
UBS's broad plans for Credit Suisse's investment bank were explained in a presentation. Most notably, elements of Credit Suisse's investment bank are to be moved into a non-core unit, which UBS CFO Sarah Youngwood said will have a parameter "broader" than Credit Suisse's current non-core unit. UBS's press release states that the "majority of Credit Suisse markets positions [will be] moved to non-core," which seems ominous for Credit Suisse salespeople and traders.
What happens to CS First Boston and to Credit Suisse' investment bankers?
What about CS First Boston? UBS CEO Ralph Hamers declined to comment on whether Michael Klein's plan for spinning out a "super boutique" is still viable. However, reading between the lines of statements made by UBS today, it sounds like something is taking shape in the shadows.
UBS says it sees the acquisition of Credit Suisse's investment bank as fulfilling some of its strategic goals. In particular, Credit Suisse brings a suite of investment bankers in the US and in technology, where UBS says it planned to expand anyway. "On the global banking side, we see value in the combined entity," declared Hamers today. "They provide some capabilities that are supportive to us."
The implication is that Michael Klein and Credit Suisse's US bankers will be incorporated into UBS. Credit Suisse's European bankers may not be.
An additional CHF8bn of cost cuts, the investment bank to account for no more than 25% of RWA
UBS also plans to cut CHF8bn of cuts from the entire combined entity following the merger. Youngwood said today that these costs will come in addition to Credit Suisse's existing cost-cutting plans and that the bulk of the cost savings will come from Credit Suisse.
Many of the cuts are likely to come from the investment bank. "The real challenge is the run down of the investment banking activities,” said Hamers of the acquisition, adding that the intention is to "refocus the investment bank" and that this "will be quite some work.” Up to CHF6bn of the CHF8bn of cuts are reportedly coming from headcount spending.
UBS intends that the investment bank (excluding the non-core business) should account for no more than 25% of risk weighted assets at the combined entity following the merger.
What happens to Credit Suisse wealth management jobs in Asia?
Credit Suisse's Asian jobs may also be comparatively protected during the merger. UBS said today that there are synergies between the two banks' operations in the region. "What Credit Suisse brings on the wealth side is quite complimentary to our strengths," said the bank. “Our strength in Hong Kong, Singapore and China that will now be complemented by Credit Suisse’s strength in South East Asia.”
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