Credit Suisse Acquisition: Key Details, Impact, and What Comes Next

UBS's acquisition of Credit Suisse marks a pivotal moment in the banking industry. This merger, finalized in 2024, consolidates two of Switzerland's largest financial institutions, aiming to stabilize the global banking system. The integration is expected to streamline operations and enhance client services, reflecting the strategic importance of such consolidations in today's financial landscape.

What Is Credit Suisse?

Founded in 1856, Credit Suisse offers a range of core services including private banking, investment banking, and asset management. With a global presence in over 50 countries, the company differentiates itself through comprehensive financial advisory services available worldwide and around the clock. Credit Suisse also emphasizes diversity and inclusion, alongside a strong focus on sustainability and corporate responsibility, setting it apart in the competitive financial services market.

Who Acquired Credit Suisse?

UBS is a global financial services company known for its comprehensive wealth management, asset management, and investment banking services. It provides tailored advice and investment solutions for distinguished investors and families, as well as investment capabilities across traditional and alternative asset classes. UBS also offers advisory services and access to global capital markets for corporate and institutional clients. Positioned as a leading financial services provider, UBS emphasizes expertise, advice, and sustainable investing, significantly influencing global financial markets.

When Was Credit Suisse Acquired?

UBS completed its acquisition of Credit Suisse on June 12, 2023. This rapid consolidation followed the March 2023 U.S. banking crisis, which significantly impacted Credit Suisse's stability. The Swiss government and the Swiss National Bank provided substantial support to facilitate the merger, aiming to prevent further turmoil in global financial markets. This acquisition is part of a broader trend of consolidations in the banking industry, driven by the need for stability and efficiency.

Why Was Credit Suisse Acquired?

• Market Expansion: The acquisition allows UBS to significantly expand its market presence by absorbing Credit Suisse's operations. This consolidation makes UBS the dominant player in the Swiss banking sector and enhances its global footprint. The merger facilitates the migration of clients and operations from Credit Suisse to UBS, effectively broadening UBS's market reach.
• Technology Integration: UBS benefits from Credit Suisse's technology through a phased integration process. Clients of Credit Suisse will continue to use existing platforms and tools for an interim period, ensuring a smooth transition. This gradual migration of client transactions to the UBS platform is expected to be completed by 2025, streamlining operations and enhancing service delivery.
• Competitive Advantage: The acquisition strengthens UBS's position against competitors by combining the capabilities and resources of both firms. This merger is expected to unlock cost, capital, funding, and tax benefits, providing UBS with operational efficiency and financial performance advantages. Additionally, the combined entity's enhanced global offerings and broader geographic reach position UBS as a stronger global firm in the banking industry.

Acquisition Terms

• Acquisition Price: CHF 3 billion (US$3.2 billion)
• Payment Method: All-stock deal
• Key Conditions or Agreements:
  • The Swiss National Bank provided more than CHF 100 billion (US$104 billion) in liquidity to UBS.
  • The Swiss government provided a guarantee to UBS to cover losses of up to CHF 9 billion (US$9.6 billion).
  • CHF 16 billion (US$17.2 billion) of Additional Tier 1 bonds were written down to zero.
  • The acquisition was completed without the approval of shareholders, using emergency powers by the Swiss Federal Council.
  • UBS agreed to wind down Credit Suisse's investment banking division.
  • The Swiss government agreed to pay UBS up to CHF 9 billion should the acquisition result in a loss for UBS, with the first CHF 5 billion borne by UBS itself.
  • UBS ended the CHF 9 billion backstop with the Swiss government and the CHF 100 billion liquidity backstop with the Swiss National Bank two months after the acquisition.
  • Credit Suisse AG has been deregistered and ceased to exist as a separate entity.
  • Clients of Credit Suisse AG have become clients of UBS AG upon the merger but will interact with UBS using existing Credit Suisse platforms and tools for an interim period.
  • The transition to a single US intermediate holding company is planned for June 7, 2024.
  • The merger of Credit Suisse (Schweiz) AG and UBS Switzerland AG is expected in the third quarter of 2024, subject to remaining regulatory approvals.
  • The merger will result in significant job cuts, with 3,000 jobs in Switzerland and potentially over 30,000 globally.
  • Switzerland's financial regulator ruled that the takeover did not create any competition concerns.

Impact on Credit Suisse

The acquisition of Credit Suisse by UBS has led to significant changes in operations and management. Credit Suisse (Schweiz) AG has been deregistered, and its operations have been integrated into UBS Switzerland AG. This merger has resulted in the departure of André Helfenstein, CEO of Credit Suisse (Schweiz) AG, and the appointment of Sergio Ermotti as CEO of UBS Group to oversee the integration. The transition to a single US intermediate holding company is planned for June 2024, with the full migration of client transactions to the UBS platform expected to be completed by 2025.

Product offerings and services have also been affected, with UBS winding down Credit Suisse's investment banking division and planning to cut costs by $10 billion. Clients of Credit Suisse will continue to use existing platforms and tools for an interim period, ensuring a smooth transition. Employee reactions have been mixed, with significant job cuts expected, potentially affecting up to 30,000 jobs globally. Customer reactions have been cautious, with a notable outflow of client funds from Credit Suisse prior to the acquisition. For founders considering business transitions, tools like Sunset can assist in managing such processes compliantly, ensuring a seamless and efficient transition.