UBS Targets Lost Credit Suisse Assets After Posting Record Bank Profit

In his first quarter at the helm of UBS Group AG, Sergio Ermotti posted a profit for the history books after the bank’s emergency acquisition of Credit Suisse.

(Bloomberg) — In his first quarter at the helm of UBS Group AG, Sergio Ermotti posted a profit for the history books after the bank’s emergency acquisition of Credit Suisse.

Now comes the hard part: Winning back over $200 billion in assets that Credit Suisse clients had pulled in the quarters preceding its takeover by UBS.

“We are counting on taking back as much as possible of the 200 billion that we lost in the last few quarters,” Ermotti said in an interview with Bloomberg TV.

Ermotti, who returned to UBS in April to oversee one of the biggest mergers ever in global finance, seeks to realign the combined bank around a money management business whose assets have swelled to more than $5 trillion. Having spent his first stint at UBS turning it into a model wealth manager after its near-failure in the financial crisis, the CEO signaled he will shutter roughly two-thirds of Credit Suisse’s investment bank.

That underlines the scale of job cuts to come as the Swiss bank absorbs its one-time rival. UBS intends to reduce its 120,000 global workforce by about 30%, Bloomberg has reported. 

Such retrenchment will be no easy task but even in those areas where deep cuts aren’t expected, the challenge facing Ermotti is daunting. 

What Bloomberg Intelligence Says:

Investor patience will be required as integration isn’t expected to be substantially completed until the end of 2026 and questions remain, especially around $10 billion of expected gross cost savings and capital-return plans likely remaining on hold — with an update due with 4Q results. 

– Alison Williams, BI senior analyst

Shares of UBS fell 0.4% at 9:34 a.m. in Zurich Friday, paring Thursday’s 6.1% gain.

The centerpiece of Ermotti’s strategy, the wealth and asset management business, must counter years of instability at Credit Suisse that allowed competitors to poach senior private bankers. To halt the defections, UBS deployed incentive programs, offering relationship managers at both firms of 15 basis points, or $0.15 for each $100 in new client money they could bring in, Bloomberg reported previously. 

Those efforts bore fruit in recent months: Credit Suisse started to see inflows at its wealth business in June and has already contributed $1 billion of net new assets for the third quarter to date, bringing the total for UBS as a whole to $8 billion. 

But UBS executives admit that despite promising signs, they know that the bank will face headwinds for months to come as departed Credit Suisse private bankers seek to lure their former clients to their new employer. On average, that process can take anywhere between six months to more than a year. 

When UBS suffered large outflows following it’s state bailout during the 2008 financial crisis, the bank was able to capture all the assets back within three years, Ermotti said. At the time, the bank only had 2% of clients who’d pulled assets actually close their account with UBS. Credit Suisse is in a similar situation, but the account closings are higher, making recapturing their assets a more difficult task, he said. 

“Look, its hard. It’s not easy. We are not complacent,” Ermotti said. But, the “times of instability are finished.” 

(Updates with analyst’s comment below sixth paragraph.)

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