UBS Chairman Axel Weber is said to have plans for turning Switzerland’s largest bank into a European champion – and even a merger with Credit Suisse seems on the table. CEOs Sergio Ermotti and Thomas Gottstein today had their say.
By sheer accident, the CEOs of both Swiss big banks UBS and Credit Suisse were penned in to appear at a webinar organized for investors of Bank of America on Tuesday, only days after the merger ambitions of UBS Chairman Axel Weber had been made public by the media. To nobody’s surprise, Sergio Ermotti and Thomas Gottstein were asked about those plans by the host of the event.
UBS CEO Ermotti, who is set to hand over the keys to the bank to his successor, Ralph Hamers, wasn’t going to give his view on the chairman’s plans. He only wanted to talk in general about mergers and acquisitions in banking.
«Too Small to Compete»
Ermotti, who is slated to take over as chairman of Swiss Re, was all in favor of further consolidation in European banking. He called consolidation both inevitable and good. Of course, it wasn’t all a question of size, he said, but for too long, discussions with regulators had focused on «too big to fail» and only rarely about «too small to compete». He, therefore, hoped that there would be a recognition of the fact that the issue had to be addressed.
The departing CEO of UBS also believes that regulators won’t stand in the way of consolidation in banking in the long term. But any merger and acquisition had to generate added value. This last point echoed concern among many experts that major transactions tend to tie up important resources.
Overbanking as a Problem
Gottstein was equally cautious in his answer, which isn’t surprising given how delicate the issue is. But the CEO of CS is equally convinced about the continuation of consolidation in an industry beset by a squeeze on margins and negative interest. Furthermore, he mentioned that many markets had too many banks.
The successor to Tidjane Thiam at the helm of CS said that such projects were hugely complex both across borders but also within a single national market. This, again, was the reason mentioned by observers why a merger between Switzerland’s No. 1 and 2 seems so unlikely.
In all, both CEOs confirmed that mergers and acquisitions correspond to a certain industrial logic. But that such transactions are complex and frequently meet opposition from regulators, making them tough to implement.
