Credit Suisse crisis: UBS Chairman points at failure of board, management, shareholders

UBS Chairman Colm Kelleher launched a scathing attack on Credit Suisse, blaming its recent woes on leadership failures at all levels. But alongside the criticism, he offered glimpses of hope for the future of the merged entity, including higher potential returns and a commitment to increased regulation, during an interview with Bloomberg in Davos, on January 17.

UBS's return on equity may be higher than currently expected once the integration of its former rival, Credit Suisse, has been completed, its chairman said on January 17. Kelleher pointed fingers at Credit Suisse's board, management, and shareholders for the bank's downfall. Higher return on equity for UBS once the Credit Suisse integration is complete

“We have given a 15% target exit ROE at the end of 2026 as a guideline, and obviously there may be upside on that,” Kelleher said, as quoted by Reuters.

Kelleher indicated his support for increased regulation in UBS's home market, aligning with the government's efforts to formulate a new approach following the Credit Suisse crisis.

Kelleher emphasized, "The big message here is that there was clearly a failure by the board, management, and the shareholders of Credit Suisse to hold Credit Suisse accountable," as quoted by Bloomberg.

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UBS has been making quick progress on integrating Credit Suisse since it agreed to buy the smaller rival in an emergency takeover ten months ago in what was the biggest banking sector tie-up since the financial crisis. Still, the acquisition comes with a raft of potential difficulties from closing out positions to managing the legal liabilities inherited from Credit Suisse, the Bloomberg report added.

"I don't think the regulators had sufficient powers. Has been pleasantly surprised by the culture of Credit Suisse employees who moved to UBS. 2024 Will be the hard year of heavy lifting," the Reuters report quoted Kelleher.

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“At Credit Suisse, we have had net new money in deposit channels and wealth management channels,” Kelleher further added, as quoted by Reuters.

Investors are urging UBS to capitalize on the Credit Suisse deal, with Cevian Capital AB, holding a stake of approximately 1.3%, expressing confidence in the bank's potential to achieve a return of over 20% on tangible equity after the integration concludes, according to the Bloomberg report.

While Kelleher acknowledged that the fusion of Credit Suisse is progressing well, he noted in the interview that the completed portion so far has been "the relatively easy bit." In contrast, he anticipates that 2024 will be "a very hard year of heavy lifting," he said, as quoted in the report.

UBS intends to merge Credit Suisse's legal entity into UBS by the middle of the year. Kelleher mentioned, "We can really start attacking those allocated and stuck costs" once this integration is completed, as per the report.

Having spent three decades at Morgan Stanley, Kelleher is currently guiding UBS through one of the most significant mergers in recent financial history as the bank assimilates its former rival, Credit Suisse. The Irishman has conveyed his forward-looking perspective, aiming to enhance the Zurich-based lender's valuation and exploring potential successors to Chief Executive Officer Sergio Ermotti.