The Swiss bank UBS eventually takes over the troubled bank Credit Suisse for $ 3 billion. UBS pays only a fraction of the market value at which Credit Suisse ended on Friday. This makes the takeover ‘the bargain of the century’, but according to Corné van Zeijl of Actiam Asset Management, there are certainly risks.
‘Credit Suisse was already reasonably downgraded and UBS also gets it for half the price. And yet they would rather not have done it’, says Van Zeijl. ‘Credit Suisse’s balance sheet was EUR 500 billion last year, compared to EUR 1100 billion for UBS. But that quickly runs out.’
In that respect, the deal reminds him of the acquisition of Barings Bank by ING in 1995. ‘That only cost ING one pound. That also seemed like a bargain, but in the end it cost them billions. UBS also runs that risk here.’
Investors will not be happy with the deal, thinks Van Zeijl. ‘Shareholders have it checked.’ UBS and Credit Suisse were worth the same a few years ago. Now that ratio is one in twenty. ‘And bondholders will not be satisfied either because there are still some subordinated loans worth 17 billion euros. They get nothing in return.’
restructuring
UBS bailed out Credit Suisse by acquiring the bank, but the move is likely to herald major job cuts at both banks. Because of the merger of the Swiss groups, many double functions are created. The Dutch UBS CEO Ralph Hamers, who was previously the boss of ING, will therefore have to reorganize considerably at the merged bank. Hamers was ING’s CEO from 2013 to 2020.
Those plans are already in place, says Van Zeijl. “Many people will be laid off. And the investment bank will be spun off and will continue as a separate entity under the name of First Boston. The chance of that happening is quite high and it can be done quite easily.’
Thousands of jobs
The two lenders together employed nearly 125,000 people at the end of last year. Even before the billion-dollar deal with UBS was closed on Sunday night, Credit Suisse was cutting 9,000 jobs in an effort to rebuild itself.
According to UBS, it is not yet possible to say exactly how many employees will have to be laid off. But the bank has already acknowledged that it is probably a significant number. Trade unions in Switzerland have already called on UBS to keep layoffs to an “absolute minimum”.
‘There are still questions we cannot answer’
According to Hamers, many details still need to be worked out. “I know there will be questions that we haven’t been able to answer,” he says in an explanation. “And I understand that and I even want to apologize for it.” He did, however, emphasize that UBS is able to absorb all the risks associated with the acquisition of Credit Suisse.
If many jobs disappear at UBS and Credit Suisse, this will probably mainly have consequences for employees in Switzerland. That’s about 30 percent of their staff. UBS and Credit Suisse each also have a branch in the Netherlands for corporate banking and serving high net worth clients.
No panic football, but exciting
The fact that the deal was closed in a weekend is not a sign of Swiss panic football, Van Zeijl thinks. “They know very well what they are doing. Credit Suisse could no longer continue like this and the Swiss state alone cannot keep that bank afloat. It is a rich country, but this is a size too big. So it’s good that they did it this way.’
‘They know very well what they are doing’
This weekend it was also announced that the Fed in America, the European Central Bank, the Bank of Japan and the Bank of Canada will jointly increase their liquidity at the commercial banks. ‘As a shareholder this does not make you happy,’ says Van Zeijl. ‘But it’s about customer confidence, but that often goes hand in hand with investor sentiment.’
The Dutch banks ING and ABN AMRO have now fallen hard on the Amsterdam stock exchange. The other European banks were also under pressure. ING fell 4 percent and ABN AMRO, which has been included in the AEX index since Monday, lost more than 4 percent.
