The idea that Switzerland’s biggest banks could merge into a $76 billion behemoth sounds like the dream of a soon-to-retire chairman seeking to leave a historic legacy. Surely there is no way that Switzerland would welcome UBS Group AG buying arch-rival Credit Suisse Group AG.
A combination would have $1.9 trillion of assets, more than twice the country’s annual GDP, and be far too dominant in its home market. After UBS’s bailout in the financial crisis, taxpayers would surely fret at the creation of a bigger, more complex bank. Yet, on paper, the strategic and financial logic is too appealing to ignore.
UBS Chairman Axel Weber and his counterpart Urs Rohner at Credit Suisse are talking about a tie-up that would help the merged bank compete better against U.S. and Asian rivals, Inside Paradeplatz reported on Monday. Weber would stay on beyond his expected departure in 2022 while Credit Suisse Chief Executive Thomas Gottstein would retain his role, the report said. That would place UBS’s incoming CEO Ralph Hamers in a rather awkward position, and Weber would be the chief architect on the project.
Neither firm has commented. Weber has been exploring the idea in the regular course of exploring strategic options, Bloomberg News reported.
Dismissing this challenging transaction outright would be a mistake. True, UBS is already the world’s biggest wealth manager. But combining with its smaller competitor would see it pull further away from the pack in terms of scale and the efficiency that brings. Technology investment will only get more expensive. From back-office to research to compliance, the scope to eliminate duplicate expenses is enormous.
UBS has struggled to cut costs without a deal, with departing CEO Sergio Ermotti repeatedly missing targets. A merger could lead to as much as 13% of the workforce leaving, or 15,000 or more worldwide, according to the Inside Paradeplatz report.