Credit Suisse takeover was on the cards in 2016, says UBS boss

UBS CEO Sergio Ermotti accused those responsible at the time of “short-term thinking”, saying they misjudged the situation. © Keystone / Ennio Leanza

The UBS management had already examined the takeover of Credit Suisse in 2016, said UBS CEO Sergio Ermotti on Sunday.

All those “who say that it is absolutely necessary to have two big banks in Switzerland, because otherwise there is a cluster risk, were thinking short-term”, Ermotti said in an interview with the SonntagsZeitungExternal link newspaper.

“The real risk was that one bank was allowed to fall into the abyss with a misguided strategy,” he added. UBS had targeted the competitor “because we saw that Credit Suisse had a wrong business model.” In addition, UBS wanted to prevent a takeover by a foreign bank, said Ermotti.

In the end, it became clear where it would lead if a bank was constantly making losses. Clients lost confidence and withdrew their money. UBS had a “good business model” and was profitable, he said.

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UBS to pay for integration costs

After the announcement of UBS’s profit last week, some started to suggest that the profit belonged to the state because it bore the risks. “For that, it would have been necessary to nationalise Credit Suisse,” Ermotti said when asked about it. “Then the state would also have had to take over the balance sheet, including the risks of Credit Suisse and carry out the restructuring process and the redundancies”. There would have been no special dividend or share buyback programme.

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In addition, UBS shareholders also took a risk, Ermotti said. The integration costs will be paid by the UBS, he said. “Only if we do everything well, will the merger be profitable,” he said.

Thanks to the emergency takeover of Credit Suisse, UBS achieved a record profit in the second quarter of 2023. Since the purchase price for Credit Suisse was significantly below its book value, UBS was able to book a so-called “negative goodwill” in the billions. On balance, the new UBS Group – consisting of the old UBS and Credit Suisse – achieved a net profit of $28.9 billion (CHF25.6 billion), according to a statement on Thursday.

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Lessons learned from the takeover

Ermotti said he was not completely satisfied with the takeover process. One lesson learned was that some internationally proven instruments should have been used earlier – and not by emergency law. For example, he mentioned the guarantee for liquidity assistance by the Swiss National Bank. “It was unnecessary to wait so long to introduce this regulation.”

The text was updated on September 3 following a correction by Keystone-SDA. 

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