Credit Suisse tie-up takes back seat as UBS board meets

Credit Suisse tie-up takes back seat as UBS board meets

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September 16, 2020

By Oliver Hirt and Brenna Hughes Neghaiwi

ZURICH (Reuters) – The board of UBS <UBSG.S> is gathering to discuss strategy this week but a merger with Credit Suisse, which had recently been examined, is not on the official agenda, said a person familiar with the matter, suggesting subdued interest in the idea.

The person said staff, working under UBS chairman Axel Weber, had examined the possibility of a tie-up with Credit Suisse <CSGN.S> in recent months but that such a deal was now considered internally as unlikely.

Chances for a takeover of Credit Suisse have faded because the combined banks’ Swiss retail and investment bank would have to be pared back so as not to become a monopoly, while some wealthy clients also would likely leave, the person said.

The examination of this scenario, widely reported this week, sets the backdrop for a meeting of the board of Switzerland’s biggest bank at its Wolfsberg conference centre near the German border.

While the idea will doubtless be discussed by board members, some of whom will participate remotely due to the coronavirus pandemic, it is not on the official agenda, indicating that Weber is putting it on the back burner.

Both banks have declined to comment.

Former Credit Suisse CEO Tidjane Thiam, ousted in February over a spying scandal, previously floated the possibility of a back office tie-up between the country’s two big banks but the idea never took off.

UBS, which is due to be run by former ING <INGA.AS> CEO Ralph Hamers from November, is on the lookout for growth opportunities in wealth management.

Credit Suisse, meanwhile, under the new leadership of CEO Thomas Gottstein, has announced plans to cut costs particularly in investment banking and Swiss retail, and continues to be scrutinised over its spying scandal.

A tie-up between Switzerland’s two largest lenders, both giants in banking for the world’s rich, could run afoul of regulations that seek to prevent banks from becoming too big to fail without damaging the financial system, according to the source.

Such a big deal would also be complex to carry out, he added.

ZKB analyst Jose Javier Lodeiro said there was some logic to a merger because the banks’ profits have been sinking for years.

“But even with the recent rumours, we don’t expect a large-scale merger to actually occur,” Lodeiro said, adding many client advisers – valued for their close ties with rich customers – would likely depart.

(Reporting by Oliver Hirt and Brenna Hughes Neghaiwi; editing by John O’Donnell and Mark Potter)


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