Ermotti suggests ‘massive downsizing’ might come to Credit Suisse’s investment bank

CREDIT Suisse may be due for a “massive downsizing” of its investment banking businesses after its takeover by UBS, chief executive officer Sergio Ermotti said in an article.

UBS went through similar steps in Ermotti’s earlier tenure, the CEO wrote in an opinion piece in Swiss newspaper Tages-Anzeiger on Saturday (Jun 17). He also said that the firm had simplified its structure and that a “prudent corporate culture” is at the core of everything they do.

“These strategic adjustments, which we will now also implement for Credit Suisse, will reduce the risks of the combined bank for Switzerland,” he added.

The fusion of the two financial giants is underway after the takeover was formally closed on Monday, almost three months after the Swiss government brokered the US$3 billion deal as Credit Suisse headed for collapse. UBS executives including chairman Colm Kelleher have made clear that remaining Credit Suisse bankers would be put through a “culture filter” to weed out undesirable practices from the acquired bank. 

Ermotti has declined to comment on figures for potential job cuts, saying earlier this month “that’s the toughest part of the task”, though it’s needed to reduce costs. He said on Monday that about 10 per cent of Credit Suisse employees had left the bank in the past few months.

“The task ahead is demanding and takes time, and difficult decisions must be made,” he wrote on Saturday. “It requires focus, humility and open communication.”

Ermotti also wrote that “the question of what will happen to Credit Suisse’s Swiss business warrants careful consideration”.

Originally, UBS planned to fully integrate the local unit but later backtracked, with Ermotti saying that all options were on the table, including sale or spinoff. At a meeting recently, Ermotti said a combination with UBS’s domestic business was the “base case scenario”, the Financial Times reported on Saturday, citing people who were present. 

UBS said it would make a decision in the third quarter of this year. 

SEE ALSO

UBS amasses 1,200 private bankers in Asia as region spared cuts

Touching on the political debate which the takeover spurred in Switzerland – including a historic probe by parliament – Ermotti wrote that “while there are important lessons to be learned from the recent crisis, we should refrain from quick fixes”.

He said that he supports a “360-degree investigation” into which parts of banking regulation worked and which didn’t, but added “confidence and profitability cannot be brought about by regulation”. BLOOMBERG