UBS CEO warns staff rival Credit Suisse ‘remain our competitor’

In a memo to UBS employees, CEO Ralph Hamers has reminded them, “Please remember that, until this deal closes, Credit Suisse is still our competitor. We cannot discuss business matters with their employees or take any action that could be interpreted as a step towards the merging of business.”

The memo comes after UBS agreed to acquire Credit Suisse in a deal worth 3 billion francs, which was negotiated in crisis talks over the weekend.

Credit Suisse is among the 30 banks worldwide considered too big to fail because of their significance to the banking system. However, the 167-year-old bank has been struggling in recent years, with losses and various issues such as money laundering charges.

UBS, Switzerland’s largest bank, has agreed to pay 3 billion francs (($3.3 billion) to acquire Credit Suisse, in a deal that UBS chairman Colm Kelleher has described as an “emergency rescue.” 

The deal was negotiated during hastily arranged crisis talks over the weekend, and it aims to address client outflows and the significant decline in Credit Suisse’s stock and bonds over the past week, following the collapse of smaller US banks.

Despite receiving a $54bn (£44.5bn) emergency lifeline from the Swiss National Bank, the markets remained unconvinced, and Credit Suisse’s shares dropped by 24%, leading to a broader sell-off in European markets.

Meanwhile, Bank of England officials have confirmed they are in close communication with their counterparts at the Swiss National Bank while regulators and management discuss Credit Suisse’s future.

Credit Suisse’s shares have experienced a sharp decline in recent weeks, with trading being halted after the share price plummeted by as much as 21%. Last week, the bank announced that it had discovered “material weaknesses” in its 2021 and 2022 financial reporting processes.

Credit Suisse Chairman Axel Lehmann previously spent over a decade at UBS before joining Credit Suisse in 2021 to lead its turnaround efforts.

Meanwhile, Credit Suisse CEO Ulrich Korner had also previously worked at UBS before leaving to join Credit Suisse, where he first helped to save the asset management division before later taking on the CEO role to turn around the entire bank.

In response, its biggest backer, the Saudi National Bank, stated that it would not purchase any additional shares in Credit Suisse.

The recent crisis of confidence in the banking industry has claimed two mid-sized US banks and now Credit Suisse, which is considered one of the top 30 most important banks globally. 

The recent failures of banks, including Credit Suisse, can be attributed to a sharp increase in global interest rates. This has resulted in a decrease in the value of safe investments that banks hold, causing concerns among investors and leading to a decline in the share prices of all banks. The banks considered weakest have been hit the hardest by this development.

As per a report by BBC, UBS Chairman Colm Kelleher announced that the investment banking division of Credit Suisse will be wound down, but no decision has been made yet regarding job cuts.

 Kelleher stated that a careful analysis of the situation is necessary before any action is taken and the process must be carried out thoughtfully.