As UBS restructures investment banking, Credit Suisse staffers are getting their turn. But former employees of the acquired bank cannot rest assured.
This week, two pieces of news partially confirmed by UBS leaked out about the reorganization of its investment banking business.
One concerns the classic business of advising companies and capital market transactions, and global banking, according to an internal memo seen by finews.asia, that UBS is considering some Credit Suisse managers for influential positions among some 40 appointments.
From 100 to 20
They include David Kostel, co-head of coverage and responsible for healthcare, Tom Churton, the new chief of staff, Jon Levin, head of retail business, Mark Warm, co-head of fixed income business, Scott Lindsay and Robin Rankin, in turn, heads of global business with mergers and acquisitions (M&A).
From UBS's point of view, it shows it's giving Credit Suisse employees a fair shake in the distribution of positions.
More sobering news also made the rounds on Monday when it was reported that Credit Suisse's investment banking in Hong Kong will be downsized from 100 to 20 positions, according to a «Reuters» report citing unnamed sources.
A first wave of layoffs at the combined bank was expected to kick off in July. Observers expected the biggest cuts at the investment bank in London, New York, and Asia. By the end of the year, 35,000 jobs could be cut at the bank, according to media speculation.
Deceptive Hope
It's likely the downsizing experienced in Hong Kong will be UBS's modus operandi in the coming weeks, with most of Credit Suisse's investment bank being wound down, with mainly individual heads and select teaming likely considered for continued employment.
Downsizing investment banking has been the mantra of UBS management led by CEO Sergio Ermotti and chairman Colm Kelleher. The group will be more focused on asset management in the future, with investment banking allowed to take up no more than 25 percent of risk-weighted assets. That is a key condition for the capital moratorium until the end of 2029 that regulators granted UBS.
No Less Leeway
The larger balance sheet of the combined bank, if last year's values are included, would be over $1.6 trillion. The exposure of the UBS investment bank has also increased if balance sheet risks are not calculated on a pro-rata basis but in absolute terms.
Even if this business is reduced from 30 percent currently to 25 percent, it doesn't necessarily mean that UBS will have to cut back on its traditional investment banking. It's more likely the bank will do the primary cutting in the Credit Suisse business. From the outset, UBS sought to scale down Credit Suisse's large trading business along with its corporate and capital markets business.
Biggest Lever
Credit Suisse's investment banking, which had annual costs of $7 billion, is the key to achieving UBS's other goals. If that's wound down, UBS will be very close to its global savings target of $8 billion by the end of 2027.
At the same time, Credit Suisse employed the most staff in its investment bank, traditionally the biggest cost driver in banking, and gives Ermotti and Kelleher a big lever to effect their savings plans, which they will no doubt pull.
