UBS to Cut 3,000 Jobs, $10B of Costs

Nicolas Payen, an analyst at Kepler Cheuvreux wrote in a note that the $29 billion accounting gain was smaller than expected following Credit Suisse operating losses and an adjustment of the purchase price, but stabilization of the business was happening faster than estimated.

A UBS veteran who spent his first stint as CEO turning the lender into a model wealth manager after its near-failure in the financial crisis, Ermotti is keenly aware of the political sensitivities surrounding the Credit Suisse deal, which he was brought back to oversee.

In a surprise move this month, UBS decided to voluntarily give up a safety net negotiated as part of the purchase, including a 9 billion-franc ($9.4 billion) government backstop. That step gives the bank more flexibility, including over the domestic franchises.

Integration Process

While signaling the underlying strength of its business, UBS is now girding investors for the process of integrating its rival, to be "substantially complete" by the end of 2026.

The bank is aiming for a cost-to-income ratio of less than 70% by the end of 2026. Yet that process will involve a complex migration of Credit Suisse clients, assets and infrastructure that's only just beginning.

Ermotti said about half of the $10 billion of the cost savings by 2026 will come from restructuring the investment bank and running down non-core assets. The other half will come from "actions across the rest of our operations."

UBS said that the wind-down unit, which houses businesses brought over from Credit Suisse that are not compatible with its strategy, had approximately $55 billion of risk-weighted assets at the end of the quarter. Some $8 billion in positions had been exited during the quarter.

What Bloomberg Intelligence Says:

UBS' results bring two key data points signaling a successful acquisition of Credit Suisse, a stabilizing wealth unit and the decision to retain and integrate the domestic Swiss unit enabling the bank to capitalize on its increased scale and competitive leadership in its domestic market. — Alison Williams, BI Senior Industry Analyst

The lender said its global wealth-management business continued to see strong inflows, with the $16 billion figure billed as the highest second-quarter figure in over a decade.

Flows of client funds at Credit Suisse's wealth unit turned positive in June. The release records Credit Suisse's final quarter as an independent company.

"UBS clearly faces a huge task in restructuring Credit Suisse, integrating key staff, retaining clients and migrating them to its own systems, solving CS's litigation issues, etc.," analysts at Vontobel Holding AG wrote in a note. "This will require significant time and management attention."

–With assistance from Alessandro Speciale and Allegra Catelli.

(Image: Bloomberg)

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