UBS and CS: There are still two major Swiss banks. Two separate companies in very different states. Yesterday and today, the most recent quarterly figures from CS and UBS showed that. Now it takes a lot of time and a lot of work to turn the unequal team into a successful megabank.
UBS CEO Sergio Ermotti does not have a simple recipe for success for the merger. But at least he said clearly today in an interview with Radio SRF what he believes is important: in addition to massive amounts of capital and liquid funds – in short: a lot of money – the trust of customers is indispensable. In addition, Sergio Ermotti wants to manage the new, even larger UBS in such a way that it generates profits, and as much as possible.
However, that is easier said than done. Even the extremely healthy UBS earned only half as much in the first quarter as in the same period last year. A special item for dealing with legacy issues from the financial crisis 15 years ago weighed on the result. Otherwise, business was sluggish. Because the wealthy clientele is insecure – due to the difficult general world situation.
Today, UBS meets all the criteria for success
After all, the rich and super-rich of this world have again entrusted tens of billions of additional funds to UBS. This inflow shows: On There is no lack of trust in UBS. A good one billion group profits in three months, that’s not a bad performance either. And so it is that today UBS – on its own – fulfills all four success criteria: it has enough capital, enough liquidity, enjoys trust and makes a profit.
Ermotti’s problem is that Credit Suisse, which he wants to take over by mid-year, lacks all of that. The trust is gone. For the time being, CS only has enough capital because the state intervened with the rescue operation on March 19. The bank also depends on the national bank for liquidity. And she writes in the red without end.
Failure is not an option
The longer patient CS lies on the hospital bed, the less business value she has for the new owner UBS. The more it becomes a burden. Sergio Ermotti therefore wants to step up the pace, wants to move forward with the merger of the two dissimilar institutes. But will the new big bank win this race against time? Or is the success story too good to be true?
Much depends on the answer. Also for the general public, including taxpayers in Switzerland. Because one thing is clear: failure is not an option this time. In the next crisis there will no longer be a Swiss competitor who could step into the field. The country’s only remaining major bank would certainly receive government support.
That’s why the fusion project is a risky experiment for everyone involved. For UBS, CS, but also for the Swiss state. Ultimately, this would have to be the guarantor for the risk of failure.