UBS faces massive dangers because it prepares to soak up its longtime archrival, Credit score Suisse, the financial institution’s chairman warned shareholders at its annual assembly on Wednesday.
In his first tackle to UBS shareholders because the takeover of Credit score Suisse was introduced on March 19, Colm Kelleher, the chairman, stated the $3.2 billion deal — brokered on the behest of the Swiss authorities — was the primary to mix two banks designated by regulators as “systemically necessary.”
It was an acknowledgment that taking up Credit score Suisse, which imploded through the latest banking disaster over longstanding considerations about its historical past of scandals and monetary losses, will current challenges. In saying the deal, the Swiss authorities stated it was ready to help UBS with billions of {dollars}’ price of economic ensures. (That stated, the deal values Credit score Suisse at a fraction of the place it had traded earlier than the takeover was introduced.)
“You can not simply put numbers collectively and attain a sum,” Mr. Kelleher instructed the greater than 1,100 shareholders assembled on the St. Jakobshalle enviornment in Basel, Switzerland. “It’s a must to perceive that there’s a enormous quantity of threat in integrating these companies.”
UBS’s vice chairman, Lukas Gähwiler, famous the pace with which the agency needed to perform the transaction. “We had solely 48 hours to hold out our due diligence,” he stated. “So many questions stay unanswered.”
At a information convention in Bern on Wednesday, the president of FINMA, Switzerland’s monetary regulator, stated the company had weighed putting Credit Suisse into bankruptcy earlier than deciding that promoting it to UBS was one of the best ways to keep away from disrupting Swiss and world monetary markets.
Shotgun mergers to avoid wasting failing banks have had a rocky historical past. JPMorgan Chase’s chief government, Jamie Dimon, has complained publicly in regards to the complications and authorized prices that got here with buying Bear Stearns and Washington Mutual through the 2008 monetary disaster. They’re experiences that Mr. Kelleher, who was the chief monetary officer of Morgan Stanley on the time, noticed up shut.
However UBS officers had been additionally fast to argue on Wednesday that their agency — which the Swiss authorities bailed out within the 2008 disaster — was in a far stronger monetary place. In contrast to Credit score Suisse, which misplaced billions in recent times from unhealthy buying and selling bets, UBS has centered totally on managing the cash of rich purchasers, a far much less dangerous enterprise.
Mr. Kelleher reiterated that his agency supposed to shut down enormous swaths of Credit score Suisse’s funding financial institution to proceed UBS’s emphasis on extra steady operations.
“Our technique is evident and unchanged,” he stated, including that threat administration and prevention of economic crime had been key focuses of UBS’s board — maybe an indirect reference to his fallen rival’s checkered historical past.
However UBS executives stated it was too quickly to say what number of workers would lose their jobs as the 2 banks are mixed. Vincent Kaufmann of the Ethos Basis, a outstanding shareholder, stated in his look on the lectern, “We anticipate that UBS will present social duty by preserving as many roles as doable.”
Wednesday’s occasion was far much less solemn than Credit score Suisse’s ultimate shareholder assembly, held on Tuesday in Zurich. At that gathering, audio system repeatedly took to the microphone to accuse executives of mismanaging the 167-year-old financial institution, an icon of Switzerland’s banking business, into oblivion.
On the UBS assembly, some shareholders stated they anxious that the Credit score Suisse takeover would create a large establishment that will dominate Swiss banking. UBS officers pushed again in opposition to that criticism, arguing that the mixed agency would nonetheless need to compete with scores of smaller banks.
Local weather activists additionally made their presence identified. Two demanded that the UBS board refuse to do enterprise with fracking corporations that it might inherit from Credit score Suisse, a serious financier of oil and gasoline corporations. Others greeted incoming shareholders exterior the sector with inflatable props and banners denouncing “fossil banks.”
