UBS swallows Credit SuisseThe end of a scandal bank
UBS swallows the once proud Credit Suisse completely. The new big bank cuts 3000 jobs in Switzerland and makes a huge profit.
The fate of the once proud but also scandal-ridden major Swiss bank Credit Suisse is sealed. Rival UBS will take over Credit Suisse’s entire Swiss business over the next few years and cut 3,000 jobs in the Alpine country. “Any job loss is very painful,” said UBS CEO Sergio Ermotti. Ermotti did not want to reveal whether and how many Credit Suisse employees outside of Switzerland will have to leave the bank.
This means that the clear cut of the Credit Suisse takeover by UBS is not quite as dramatic as experts had feared. Overall, the UBS CEO is aiming for cost reductions of ten billion US dollars (9.17 billion euros) in his new, by far the largest Swiss bank.
Net income of $29 billion in the second quarter
Ermotti presented the UBS results for the second quarter: In the months of April, May and June, UBS achieved a net profit of 29 billion US dollars (26.6 billion euros). This, at first glance, fairytale profit can be explained by the bargain price for Credit Suisse that UBS negotiated in March: It was only three billion Swiss francs (3.13 billion euros). The deal was preceded by a week-long struggle for survival by Credit Suisse.
In Switzerland, the fate of Credit Suisse is greeted with nostalgia. “The survivor is finished,” writes the “Neue Zürcher Zeitung” in an obituary. “In any case, no one can take away from Credit Suisse its role as midwife of modern Switzerland.”
The Credit Suisse story began in Zurich, where railway pioneer Alfred Escher founded the Schweizerische Kreditanstalt in 1856, the predecessor of Credit Suisse. The credit institution provided Swiss companies with capital and fired up the economy. At the same time, the political power of the bank grew, which was able to conduct its business almost unmolested by the government and parliament. In the 1980s, the Swiss ventured into big investment banking, acquiring the US First Boston Corporation. For a long time, billions in profits bubbled up in the Credit Suisse empire.
The hubris at Paradeplatz grew
But in addition to the numbers, the hubris on Zurich’s Paradeplatz also swelled. Managers increasingly pushed laws aside, created crises and destroyed trust. The then Credit Suisse boss Brady Dougan received a bonus of 70.9 million francs in 2010. In 2014, Credit Suisse had to pay a record fine of more than $2.5 billion in the US for helping with tax evasion.
Most recently, customers withdrew billions and the bank made huge losses. The Zurich Sunday newspaper of the Tages-Anzeiger summarizes Credit Suisse’s disreputable strategy as follows: “Be it dictator or mafia money, corruption affairs, money laundering, aiding tax evasion, violations of sanctions – the bank always promised to do better. Instead, every old scandal and every incompetent boss was followed by a new one.”