BackUBS plans to own Credit Suisse by 2023 end, a look at financial numbers, layoff plans, employees
As part of the merger, all shareholders of Credit Suisse will get 1 equity share in UBS for their 22.48 shares in Credit Suisse. This exchange ratio reflects a merger consideration of CHF 3 billion for all shares in Credit Suisse. Colm Kelleher will be Chairman and Ralph Hamers will be Group CEO of the combined entity.
PremiumTo restore the lost confidence in the Swiss economy and banking sector due to contagion fear, this country's regulators led a mega deal between the two banks. UBS will soon become the new owner of troubles-filled Credit Suisse. The deal is expected to close by the end of 2023. UBS will acquire Credit Suisse for CHF 3 billion (approximately $3.25 billion). But what about employees of Credit Suisse, and how much is UBS going to acquire from Credit Suisse? As of now, UBS has shown confidence to continue the employment of staff at the embattled lender. While the deal is significant during banks turmoil.
As part of the merger, all shareholders of Credit Suisse will get 1 equity share in UBS for their 22.48 shares in Credit Suisse. This exchange ratio reflects a merger consideration of CHF 3 billion for all shares in Credit Suisse. Colm Kelleher will be Chairman and Ralph Hamers will be Group CEO of the combined entity.
Credit Suisse said, “the merger is expected to be consummated by end of 2023 if possible."
Let's have a look at Credit Suisse's financial results and what can be expected in regard to employees.
In 2022, Credit Suisse's financial results looked like the following:
- Net revenues stood at CHF 14.92 billion, down by 34% compared to CHF 22.69 billion in 2021.
- Total operating expenses dipped by 5% to CHF 18.16 billion (approximately $19.59 billion) versus CHF 19.09 billion in 2021.
- Credit Suisse widened its net loss attributable to shareholders to CHF 7.29 billion as against CHF 1.65 billion in 2021.
- Assets under management came in at CHF 1.29 billion, declining by 19.9% from CHF 1.61 billion in 2021.
- The company recorded an outflow of in net assets at CHF 123.2 million compared to an inflow of CHF 30.9 million in 2021.
- Under Basel III regulatory capital and leverage statistics, the company's CET1 ratio marginally dipped to 14.1% versus 14.4% in 2021. While the CET1 leverage ratio and Tier 1 leverage ratio rose to 5.4% and 7.7% in 2022 compared to 4.3% and 6.1% respectively in 2021.
- Credit Suisse is informed by FINMA on Sunday that its Additional Tier 1 Capital (deriving from the issuance of Tier 1 Capital Notes) in the aggregate nominal amount of approximately CHF 16 billion will be written off to zero.
- By end of December 2022, the company had an outstanding share of 3,941.3 million as against 2,569.7 million in 2021.
- In India, Jefferies earlier highlighted that Credit Suisse has ₹20,000 crore in assets (12th among foreign banks), a presence in the derivatives market, and funded 60% of assets from borrowings, of which 96% is up to 2 months. Still, it's small for the banking sector with a 0.1% share of assets.
- Total assets stood at CHF 531.36 billion in 2022 as against CHF 755.83 billion in 2021. Meanwhile, net loans were at CHF 264.16 billion as against CHF 291.69 billion.
- As of December 31, 2022, its employee headcount was at 50,480 as against 50,390 employees in 2021.
In its annual report, Credit Suisse said, "we already reduced contractor headcount by approximately 30% and consultant headcount by approximately 20% in the fourth quarter of 2022, as we progress towards a targeted 50% reduction in consultancy spend and a 30% reduction in contractor spend in 2023. The number of employees was reduced by approximately 4% in the fourth quarter of 2022, including notified reductions in workforce."
Credit Suisse in the annual report said, that it expects to run the bank with approximately 43,000 employees (based on full-time equivalents) by the end of 2025 compared to approximately 52,000 at the end of the third quarter of 2022, reflecting natural attrition and targeted headcount reductions.
Post the acquisition, whether UBS will also plan the same headcount reduction to 43,000 by end of 2025, will be keenly watched.
However, for now, Credit Suisse announced on Sunday that the company "continues to operate in the ordinary course of business and implement its restructuring measures in collaboration with UBS." Also, UBS has expressed its confidence that the employment of the staff of Credit Suisse will be continued.
Together, the two Swiss lenders have employed about 125,000 people in 2022, of which 30% are in Switzerland.
In a statement on Sunday, UBS said, that the combination of the two businesses is expected to generate an annual run-rate of cost reductions of more than $ 8 billion by 2027. This isn't even half of Credit Suisse's total operating expense in 2022.
UBS Chairman Colm Kelleher in a press conference on Sunday, reported by Bloomberg said, the company intends to downsize Credit Suisse’s investment banking business and align it with our conservative risk culture.
Kelleher said that he understood the coming months would be “difficult" for Credit Suisse staff and promised UBS will do what it can to keep the uncertainty as short as possible.
Also, Bloomberg reported that a spokeswoman said that there will be no changes to payroll arrangements and bonuses will still be paid on March 24 to Credit Suisse staff.
Moreover, UBS highlighted that the combined entity is expected to create a business with more than $5 trillion in total invested assets and sustainable value opportunities. Also, it will further strengthen UBS’s position as the leading Swiss-based global wealth manager with more than $3.4 trillion in invested assets on a combined basis, operating in the most attractive growth markets.
Further, the transaction reinforces UBS’s position as the leading universal bank in Switzerland. The combined businesses will be a leading asset manager in Europe, with invested assets of more than $ 1.5 trillion.
Both companies are headquartered in Zurich, Switzerland.
UBS said it benefits from CHF 25 billion of downside protection from the transaction to support marks, purchase price adjustments, restructuring costs, and additional 50% downside protection on non-core assets.
Both banks have unrestricted access to the Swiss National Bank's existing facilities, through which they can obtain liquidity from the SNB in accordance with the guidelines on monetary policy instruments.
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