Banking Behemoths Unite: UBS and Credit Suisse in Historic Merger


Banking Behemoths Unite: UBS and Credit Suisse in Historic Merger
Banking Behemoths Unite: UBS and Credit Suisse in Historic Merger © Getty Images

UBS embarked on a risky yet potentially rewarding venture: the acquisition of its struggling rival, Credit Suisse. This bold step was taken to prevent a looming global banking crisis, and it marked a significant moment in financial history.

The Unexpected Call

The day following the explosive announcement in March, UBS’s former CEO Sergio Ermotti received an unexpected call from UBS chairman Colm Kelleher. Ermotti, who had left UBS just three years earlier and was chairing a Swiss insurance company at the time, was caught off guard. "I was definitely not expecting the phone call," Ermotti recounted in an interview with CNN.

Kelleher’s call was more than a mere check-in; it was a plea for Ermotti to return to UBS as CEO and navigate the perilous waters of the emergency takeover of Credit Suisse. This deal, encouraged by Swiss authorities and met with resistance from shareholders and local lawmakers, was a historical first: the merger of two global systemically important banks, a group that includes giants like Bank of America and JPMorgan.

A Merger of Giants

This merger wasn’t just any corporate deal; it was a high-wire act with no safety net. The stakes were immense: a potential failure could shake confidence in UBS and, by extension, destabilize the global financial system.

Anke Reingen, a banking analyst at RBC Capital Markets, highlighted the gravity of the situation, underscoring the possible repercussions on the wider financial landscape. Ermotti's decision to return wasn't made lightly. Driven by a sense of duty to Switzerland and loyalty to UBS, coupled with his own competitive nature, he saw this as an opportunity to realize a long-held ambition from his previous tenure as CEO.

"It would be a little bit of a contradiction from me not to accept the job ... to basically execute on what I believed was the right next move for UBS," Ermotti stated at a press conference. The merger instantly catapulted UBS to the position of the world’s second-largest wealth manager, trailing only behind Morgan Stanley.

It brought in an influx of client money equivalent to seven years of growth in a single transaction. However, this deal was not without its challenges. UBS not only acquired a bank labeled as “structurally loss-making” by Ermotti but also inherited a slew of legal issues and compliance failures.

The complexity of merging two massive banks added another layer of difficulty. Kelleher, the UBS chairman, did not downplay the challenge. "I cannot emphasize (enough) how big this deal is in terms of financial history and financial engineering that’s required," he stated in March.

The integration of these two banking behemoths carries immense risks, making the journey ahead for UBS and Ermotti a path filled with both potential triumphs and pitfalls.