UBS, Credit Suisse chiefs in the spotlight

The heads of Switzerland's two biggest banks were set for further talks Sunday in which UBS could salvage Credit Suisse, which required a $53.7 billion rescue last week over growing doubts about its solvency.

UBS, Credit Suisse chiefs in the spotlight
Photo: Fabrice COFFRINI/AFP

UBS chief executive Ralph Hamers, whose priority until now was to invest in digital technology, will have to decide whether his bank takes over all or part of its struggling rival.

Credit Suisse boss Ulrich Koerner knows UBS inside out and may be able to use that to smooth the negotiations, even if until now he had been determined to plough on with a restructuring plan for his bank he launched in October.

Ralph Hamers

Hamers, a 56-year-old Dutchman, has been in the hot seat at UBS since November 2020.

He built up a solid reputation at ING, taking over when the Dutch bank was having trouble repaying a state bailout of €10 billion extended during the global financial crisis.

Under his stewardship, ING finally repaid its loans seven months before the deadline.

But under his watch, ING also had to settle a €775-million laundering probe with Dutch authorities in 2018 after it failed to ensure that people were not hiding cash used for illegal purposes in its accounts.

Hamers took over at UBS from Sergio Ermotti, now chairman of the reinsurer Swiss Re.

Ermotti had spent nine years restoring UBS’s reputation after its bailout by the Swiss government and the central bank in 2008, as well as the $2.3 billion in losses racked up by a rogue trader in 2011.

Ermotti handed over the UBS keys with the bank in good condition, giving Hamers the room to launch the next phase in its growth: turning it towards digital technology, which had been one of his main achievements at ING.

But Hamers has suffered some setbacks. Last year, UBS had to give up on the $1.4 billion acquisition of Wealthfront, an automated investment service firm based in California.

The plan fell through but Hamers, running a bank which generated a profit of $7.6 billion last year, has continued to invest in digital.

Hamers regularly appears without a tie and with his shirt collar open, a far cry from the austere uniform adopted by most bankers in Zurich.

Ulrich Koerner

Koerner, 60, became chief executive of Credit Suisse in August 2022. He moved into the top job after tackling its asset management division following the bankruptcy of British financial firm Greensill, in which the bank had committed some $10 billion.

Koerner, who holds a doctorate degree in economics, began his career with the consulting firm McKinsey.

He later worked at Credit Suisse in various roles between 1998 and 2009, notably directing activities for the Swiss market, before moving to UBS until 2020.

The German and Swiss national returned to Credit Suisse in 2021, tasked with turning around the asset management business after the Greensill affair.

Koerner had already distinguished himself by his ability to carry out restructuring programmes. As head of operations at UBS, he transformed core functions at the headquarters “like a machine”, noted the Tages-Anzeiger newspaper.

He unveiled a restructuring programme for Credit Suisse at the end of October, planning to hive off the investment bank and refocus the group on more stable activities such as wealth management.

The plan included 9,000 job cuts by 2025, which would reduce the workforce by 17 percent.

On Tuesday, on the eve of the bank’s worst-ever day on the stock exchange, Koerner urged investors to give him three years, as planned, to implement the overhaul and see it bear fruit.

But with an annual loss of 7.3 billion Swiss francs last year and further losses predicted for 2023, investors were unconvinced, prompting the Swiss central bank to extend an emergency loan of 50 billion Swiss francs (€54 billion).

Member comments

Log in here to leave a comment.
Become a Member to leave a comment.


Swiss sweat over size of new superbank

The arranged marriage of UBS and Credit Suisse will create the biggest bank Switzerland has ever seen, with some wondering if the superbank might be too big for its own good.

Swiss sweat over size of new superbank

The deal struck late Sunday prevented the collapse of the country’s second-biggest lender by folding it into the largest.

Even before last week’s dramatic events, both firms were already among the 30 around the world deemed of strategic importance to the global banking system and therefore too big to fail.

Some in business, industry and politics are not convinced that one even bigger bank will turn out for the better.

“Credit Suisse was really the bank of the economy and industry,” said Philippe Cordonier of Swissmem, the national association representing the engineering industry.

For exporting companies, Credit Suisse offered a range of services essential for international transactions, “payments abroad, credits, leasing or currency hedging”, he told AFP.

READ ALSO: How Switzerland reacted to shock UBS buyout of Credit Suisse

Less competition

“This is where the question arises of what skills will be kept,” said Cordonier, as the profiles of the two banks, although close, are not identical.

So far, many questions remain unanswered.

Such a takeover would normally need months of negotiations, but UBS only had a couple of days, under some serious arm-twisting by Swiss authorities.

UBS chief executive Ralph Hamers admitted at an analysts’ conference that he did not yet have all the details of the takeover.

Switzerland is a confederation of 26 cantons and Cordonier said the alternative could be to turn from the national banks to the cantonal banks.

READ ALSO: What are Swiss cantonal banks and does it make sense to move money there?

However, many do not currently have the skills to help companies export to far-off markets such as Asia, and would have to develop them.

The other option is to turn to foreign banks, although they would not possess “in-depth knowledge” of the Swiss market, Cordonier said.

“If there is only one major bank that has the capacity to work abroad, this will restrict the choice of solutions for companies,” said the engineer, who is also concerned about the repercussions on costs “if there is less competition”.

Photo: Fabrice COFFRINI/AFP

SMEs worried

Founded in 1856 by Alfred Escher, the godfather of Swiss railways, Credit Suisse was closely linked to the country’s economic development.

The bank financed the expansion of the rail network, the construction of the Gotthard Tunnel beneath the Alps, and the start-up of Swiss companies that
went on to become leaders in their sector.

“Twenty-five years ago, there were four big Swiss banks,” recalled the Swiss Federation of Companies, which represents small and medium enterprises.

The banking sector has already seen major convergence in 1998 when the Swiss Bank Corporation merged with the Union Bank of Switzerland to form the modern UBS.

“The concentration into a smaller number of banks reduces competition and makes it more difficult to obtain good financing conditions for SMEs,” the federation said in a statement.

The orchestrated takeover has also triggered virulent criticism among Swiss political circles, of all stripes.

READ MORE: How safe is your money in a Swiss bank? 

Politicians have called for the further tightening of regulations – which are already strict in Switzerland – in the face of this new giant, which will dominate the nation’s banking sector.

Swift solution

A partial nationalisation could “at least” have been considered, said Tobias Straumann, professor of economic history at the University of Zurich, told the Berner Zeitung newspaper.

Carlo Lombardini, a lawyer and professor of banking law at the University of Lausanne, said the UBS takeover “was surely the only swift and feasible solution”.

However, he would have preferred another outcome, such as a takeover “by a foreign bank”, he told AFP.

“But a large foreign group doesn’t do acquisitions in a weekend,” he admitted.

The other solution would have been to nationalise Credit Suisse “to enhance the good bank” and consolidate the poor assets into a “bad bank” to be liquidated, he explained.

However, it is already too late for such what-ifs, Lombardini said.

“It’s like wondering what would have happened if Napoleon had not lost at Waterloo,” he said.

“The real problem is we are going to have an even more ‘too big to fail’ bank,” he warned.

By Nathalie OLOF-ORS