Senior leadership at UBS acknowledged the significant work ahead of Switzerland’s largest bank as it begins preparing to absorb the country’s second-largest bank, Credit Suisse.
“Both banks have to be continued and integrated in the coming years,” said Lukas Gähwiler, UBS’s vice chairman of the board of directors, during the bank’s annual general meeting of shareholders Wednesday. “This is a Herculean task that will need more rather than fewer people in the short run.”
UBS announced March 19 it would purchase Credit Suisse for 3 billion Swiss francs (U.S. $3.3 billion) after the latter institution was deemed at risk of becoming illiquid as depositors raced to withdraw their funds from the bank. The Swiss Financial Market Supervisory Authority (FINMA) stepped in to help coordinate the merger once it determined recent initiatives undertaken by Credit Suisse to overhaul its risk management practices and restore its reputation weren’t enough to restore confidence in the bank.
Gähwiler said UBS had only 48 hours to carry out due diligence before the takeover was announced.
“Our primary priority is to stabilize Credit Suisse’s client business,” he said. “We did not go looking for this transaction. But everyone concerned agreed that a takeover of Credit Suisse by UBS would minimize the damage for Switzerland and the insecurity on international financial markets.”
He estimated the merger would likely take months to complete and that working at speed is paramount to stem the “great uncertainty” lingering while the deal is underway. Another issue facing the planned acquisition is an investigation launched by Swiss prosecutors earlier this week to determine if criminal offenses were committed while the rushed transaction was executed.
UBS has already made changes to its executive ranks to prepare for the Credit Suisse integration, announcing March 29 that Sergio Ermotti would return to the bank as group chief executive officer. Ermotti was previously the Group CEO of UBS for nine years and “successfully repositioned UBS following the severe challenges arising from the global financial crisis,” the bank said in its press release.
Ralph Hamers agreed to step down, effective Wednesday, to facilitate the change.
“Integrating Credit Suisse successfully is the most important task for UBS,” he told shareholders. “I am confident that the new CEO Sergio Ermotti, with his outstanding record and experience, will lead the firm safely through this next phase.”
Colm Kelleher, chairman of the UBS board of directors, also spoke Wednesday, acknowledging the Credit Suisse acquisition is not expected to halt other growth initiatives underway for the bank.
“Equally, risk management and control, including operational resilience, conduct, and prevention of financial crime, remain key focus areas of the board of directors,” he said.
At Credit Suisse’s annual meeting Tuesday, Board Chairman Axel Lehmann apologized to shareholders regarding’s the bank’s swift downfall, saying he and the rest of its leadership did the best they could to avert collapse.
“The period from October to March was not long enough,” he said. “One legacy issue after another had already seen trust eroded—and with it, patience dwindled. At that, we failed. It was too late. The bitter reality is that there wasn’t enough time for our strategy to bear fruit.”