UBS Group AG bankers have descended on Credit Suisse Group AG to start digging through their former rival’s books as the Swiss firm aims to kickstart an integration process it’s deemed one of the most complex ever.
UBS has sent a so-called “clean team” of about 100 people to assess client rosters and talent, as well as which business lines should be earmarked for a wind-down unit, the people said, asking not to be identified as the matter is private. UBS is aiming to complete the deal as soon as this month, with urgency heightened by Credit Suisse’s warning that the limbo state has already caused a spike in employee turnover.
Electing which businesses should be tagged for disposal in a so-called bad bank is particularly important for UBS, since only those will be eligible for the about 9 billion francs (about $10 billion) of loss guarantees that the Swiss government is offering as a sweetener for the deal. Those guarantees only kick in after UBS shoulders the first 5 billion francs (approximately $5.6 billion) of any losses, and any hit outside the wind-down unit will be solely UBS’s problem.
The team includes staff from UBS’s wealth, investment bank, credit analysis and operations divisions among others, the people said. While the approach is typical of any sizeable takeover, the size of the team and the condensed closing timeline highlight the complexities of an emergency weekend deal meant to stave off potential bankruptcy for Credit Suisse. UBS is working quickly to understand the potential problems and opportunities in Credit Suisse’s business after forgoing the usual months-long due diligence process.
Chief executive officer Sergio Ermotti said that the bank would do everything within its power to avoid imposing losses on taxpayers. He’s also said there may be cases where UBS has a “different view” on some wealth clients and may not bring them on board.
UBS has said it expects the 3 billion-franc (about $3.4 billion) transaction to close later this month or in June. The time pressure is boosted by staff departures, further client withdrawals that erode the profitability of the future business, and the limited ability to examine client relationships that stems from Swiss secrecy laws.
Credit Suisse reported 61 billion francs (approximately $68.2 billion) of client asset outflows for the first quarter that ended March 31, with the bulk exiting in the last weeks of March as the bank hurtled toward the UBS rescue.
Spokespeople for UBS and Credit Suisse declined to comment on the integration processes.
The special UBS task force at Credit Suisse is under strict restrictions and non-disclosure agreements that prevent them from communicating with UBS colleagues until the transaction closes, the people said. They’re already looking at potential overlap and exposures across businesses, such as derivatives and loans, the people added. Client names in some jurisdictions are still blacked out under local laws.
Credit Suisse may have given UBS a head start, as it had already created a runoff unit as part of its final restructuring plan and shifted about $144 billion worth of assets into it, representing almost a quarter of its balance sheet. Still, UBS may find businesses it wants to keep from that unit and tag others for disposal. UBS has told investors it plans to lay out the perimeter of the non-core unit with its second-quarter results, provided the deal closes on time.
Merger Prep
In the meantime, UBS has also created global integration committees spanning the wealth, asset management, and investment bank divisions, as well as for the technical infrastructure functions. The task is to map out which deals, transactions, and clients are potentially on the books of their counterpart, and be ready to act once the bank has full access to its competitor’s business, people familiar with the matter said.
UBS staff are also assessing which Credit Suisse technology systems, including in its trading business, that they will need to maintain to make sure business runs smoothly, the people said.
UBS has also hired Yves-Alain Sommerhalder, a 20-year veteran of Credit Suisse who previously ran the firm’s global trading solutions platform, who will help spearhead the assessment of Credit Suisse’s critical wealth-management business, according to people familiar with his hire. He will be working alongside Todd Tuckner, who is helping lead the wealth integration team, one of the people said.
Sommerhalder left Credit Suisse in November and was initially recruited to UBS by Iqbal Khan, who runs the bank’s wealth division and used to head up the equivalent unit at Credit Suisse. While he was originally sought out for a client-facing regional role, UBS is keen to use him to speed up their understanding of Credit Suisse’s business, particularly complex trading structures the bank set up for its more sophisticated wealthy clients, the people said.
Sommerhalder declined to comment. Handelszeitung earlier reported Sommerhalder’s new role.
UBS has also hired strategy consultant Oliver Wyman for advice on the takeover as it prepares job cuts and winding down unwanted businesses.
