UBS and Credit Suisse investment banking division will reportedly undergo restructuring
UBS is about to shake things up even more in its investment banking division as soon as this week. This will include some Credit Suisse bankers taking on bigger roles and others leaving.
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The backstory: Back in March, after a string of scandals, there was a major crisis at Credit Suisse, and it looked like the bank would collapse. But then Swiss bank UBS agreed to buy it for 3 billion Swiss francs (around US$3.25 billion). This rescue was orchestrated by the Swiss authorities to prevent a major global banking disaster.
Since taking over Credit Suisse, UBS has taken a cautious approach towards Credit Suisse's investment bank. It made it clear that it would stick to its own strategy, emphasizing a smaller, “capital-lite” securities unit and use Credit Suisse’s investment bank only to shore up its global business. After the buyout, UBS's workforce grew to about 120,000, but it plans to cut this by about 30% (more than half of Credit Suisse’s employees) within the next few years, aiming to save about US$6 billion in staff costs.
More recently: Last week, UBS reportedly laid off Credit Suisse employees in New York and shut down its office in Houston. Aside from saying the job cuts would start in July, the whole investment banking scene is also going through a slowdown in dealmaking. Deal values have plummeted by over 40% this year, putting Wall Street banks, including UBS and Bank of America, in a challenging position.
The development: Now, according to Reuters, UBS is about to shake things up even more in its investment banking division as soon as this week. This will include some Credit Suisse bankers taking on bigger roles and others leaving. The changes will have a big impact on various dealmaking teams, including health care, consumer/retail, financial sponsors and equity capital markets. Some senior bankers at UBS are also reportedly considering leaving the company.
On top of that, another report by Reuters revealed that around 80% of Credit Suisse's investment banking staff in Hong Kong, where the region houses the largest number of Credit Suisse investment bankers in Asia, will be facing job cuts this week. Only about 20 bankers are expected to retain their positions.
Key comments:
“These strategic adjustments, which we will now also implement for Credit Suisse, will reduce the risks of the combined bank for Switzerland,” said UBS CEO Sergio Ermotti in June.
“It’s the start of a new chapter — for UBS and the global financial industry,” said Ermotti and the lender’s chairman Colm Kelleher in an open letter published in June.
"The investment bank is the bit that most people want to spin-off," said James Athey, investment director at Abrdn, in March. "That's likely where a lot of these exposures are. So that's the challenge that needs addressing."
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