From Sceptics to Stars: UBS’s $29 Billion Gain After Rescuing Credit Suisse

UBS, initially sceptical about rescuing Credit Suisse, has now greatlynow benefited greatly from the takeover, making it Europe's second-most valuable bank. The state-sponsored deal generated a $29 billion gain, marking a record quarterly profit for any bank. CEO Sergio Ermotti confirmed that UBS would keep Credit Suisse's domestic consumer bank while selecting the most attractive assets, clients, and staff from the investment and wealth management divisions. This boosted UBS's stock, making it the second-largest European bank after HSBC.

However, the acquisition faces challenges such as staff integration, client retention, and litigation issues. While political objections have subsided, the acquisition has stirred controversy in Switzerland, especially as UBS plans job cuts. The integration process is expected to take up to three years, which is shorter than what was initially anticipated.

Nonetheless, the deal enhances UBS's global footprint, particularly in asset management and investment banking. The bank plans to strengthen its position as both a global wealth manager and the leading Swiss universal bank. UBS aims to regain the assets lost by Credit Suisse clients and has already seen some success in this regard.

Investors remain cautious about execution risks and the complexity of the merger, but UBS's strong capital position suggests the possibility of share buybacks and improved shareholder returns in the future. Closing the valuation gap with competitors like JPMorgan and Morgan Stanley remains a challenging task, the favourable outcome of which is dependent on the successful integration of Credit Suisse and improved performance.

Written By Rishit Singh