UBS to cut another $3 billion in costs as it absorbs Credit Suisse
UBS has raised its cost cutting targets.
London (CNN) — UBS has deepened a cost cutting drive launched after its emergency acquisition of rival Credit Suisse, as it slashes thousands of jobs and tries to boost earnings to make sure the mammoth deal pays off.
The Swiss lender said Tuesday that it was now targeting $13 billion in savings by the end of 2026 — $3 billion more than it announced six months ago.
The savings will provide “necessary capacity for reinvestment to reinforce the resilience of our infrastructure as we absorb Credit Suisse and to drive sustainable growth by investing in talent, products and services,” it added.
UBS (UBS) has already trimmed costs by $4 billion — including through job cuts — or roughly one-third of the amount now targeted. It slashed headcount in the fourth quarter by more than 3,100 to under 113,000, taking the number of layoffs announced last year above 16,000.
Staff previously employed in Credit Suisse’s investment bank made up “a strong part” of the fourth quarter job cuts, chief financial officer Todd Tuckner told reporters on a call. Many of them were in the United States and United Kingdom, “but also spread across the globe,” he added.
More job losses are likely after the combined bank secures all the necessary regulatory approvals for the merger, likely by the middle of this year. Staff working on those tasks are “critical to retain until such time as the entities come together,” said Tuckner. “At that point we will look at what’s required and what’s needed.”
UBS reported a net loss of $279 million for the October-to-December period, its second consecutive quarterly loss, partly driven by costs tied to the deal. It follows a loss of $785 million for the June-to-September quarter. The bank expects to “substantially improve” its performance in the first quarter of 2024, Tuckner said, without commenting on whether it will swing to a profit.
UBS CEO Sergio Ermotti told reporters he was “very happy” with the speed at which the integration was progressing but “not complacent.”
“The momentum is good, but this is a marathon not a sprint,” he said. “It’s a very complex integration and we need to always look forward rather than look backwards in respect of our successes.”
UBS agreed to buy Credit Suisse last March for the bargain price of $3 billion in a rescue orchestrated by Swiss authorities to avert a banking sector meltdown. The deal, the biggest in banking history, has created a giant Swiss bank with assets of more than $1.7 trillion.
Since closing the acquisition in June, UBS saw $77 billion of net new money flow into its global wealth management business and attracted the same net amount of deposits across the group.
Growing its investment banking presence in the United States is a “very clear priority,” said Tuckner, noting that the US bankers it had inherited from Credit Suisse would make a considerable difference in narrowing the gap with Wall Street rivals.
For 2023 as a whole, UBS reported a profit of $29 billion, which largely reflected an accounting gain booked on the difference between the knockdown price it paid for Credit Suisse and the much higher value of the failing lender’s balance sheet.
UBS also said it would reinstate its dividend of 70 cents a share and buy back up to $1 billion in shares in the second half of this year, resuming a program to return capital to shareholders that it had paused following the Credit Suisse deal.
Ermotti has previously said that 2024 will be the “pivotal” year in the takeover of Credit Suisse, with the migration of IT systems presenting huge risks as the two banks merge operations across more than 50 countries.
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