ZURICH: UBS and Credit Suisse, the two biggest banks in Switzerland, are in takeover talks, according to several media reports – a move long deemed unthinkable as the pair are so similar.
The negotiations, which would see UBS take over its embattled smaller domestic rival, are being orchestrated by the Swiss regulators in an attempt to reassure the markets before they reopen on Monday (Mar 20).
Credit Suisse is still looking shaky despite taking a US$54 billion lifeline thrown by the Swiss central bank. Investors remain nervous about its future following the collapse of two banks in the United States that sparked contagion fears.
During the week, US analysts had already floated the possibility of a takeover by UBS, which made a healthy US$7.6 billion dollars in net profit in 2022.
Rivals Credit Suisse, headquartered no more than 300 metres away in central Zurich, meanwhile suffered a loss of 7.3 billion Swiss francs (US$7.9 billion).
WEALTH MANAGEMENT, INVESTMENT BANKING
Both banks derive most of their revenue from wealth management and investment banking.
UBS is the world leader in wealth management and generated nearly 15 per cent of its US$34.5 billion in turnover in 2022 through this global arm.
At Credit Suisse – level with the United States’ Morgan Stanley in second place – wealth management contributed 22 per cent of the 22.4 billion Swiss francs in turnover.
Investment banking represents 25.2 per cent of UBS’s turnover, compared to nearly 20.6 per cent at Credit Suisse, with the pair running many similar activities such as mergers and acquisitions advice.
In October, Credit Suisse began a major restructuring project that plans to separate its investment banking from the rest of its activities after a series of scandals.
However, many investors consider the revamp to be too complex – and UBS might want to steer clear of taking over Credit Suisse’s problematic investment banking.
RETAIL BANKING IN SWITZERLAND
Both banks are active in asset management and retail banking. UBS relies on a network of nearly 200 branches in Switzerland, compared to 95 for Credit Suisse.
The Swiss domestic branch of Credit Suisse, considered one of its jewels, is particularly active in mortgages and loans to small- and medium-sized businesses.
In a note Thursday, analysts at US financial services giant JPMorgan thought this arm of Credit Suisse would probably have to be spun off or listed separately on the stock exchange in the event of a merger.
Switzerland’s Competition Commission might be reluctant to approve a merger in this field.
PILLARS OF SWISS BANKING
UBS and Credit Suisse are at the apex of banking in a country known worldwide for its banking industry.
UBS, in its modern form, was born in 1998 when the Swiss Bank Corporation merged with the Union Bank of Switzerland.
SBC’s origins date back to 1854 when six wealth management establishments in Basel joined forces, while the Union Bank of Switzerland dates back to 1852 and the creation of a bank in Winterthur, a city at the heart of the industrial revolution in Switzerland.
Credit Suisse was born around the same time in 1856, at the instigation of Alfred Escher who wanted to finance the Swiss railway boom.
Credit Suisse has also contributed to the emergence of insurance stalwarts, such as Swiss Life and Swiss Re, and industrial giants like Brown Boveri, the ancestor of the ABB engineering group.
Today the two banks are global groups, with UBS employing 72,597 people and Credit Suisse 50,480.
CAREERS CROSSING BETWEEN BANKS
With the two banks’ headquarters so close to each other, it is not uncommon for careers to be made with one and then continue at the other.
Credit Suisse chairman Axel Lehmann spent more than 11 years at UBS before being called to the rescue in 2021 to turn Credit Suisse around.
And Credit Suisse chief executive Ulrich Korner left the bank to join UBS before returning, first to save the asset management branch and then the whole bank by taking the CEO hot seat.