Credit Suisse Group AG’s CS-N dealmakers, hoping to secure jobs after UBS Group AG’s rescue takeover, are struggling to dispel fears about a culture clash and many will be disappointed, sources familiar with the talks told Reuters.
UBS UBS-N bankers over recent weeks have been meeting with their counterparts at Credit Suisse in the world’s biggest financial centres, to move quickly on potential new jobs once the merger is completed, four sources with knowledge of the talks said.
Only a very small number of Credit Suisse senior bankers who have strong client relationships will be retained, said one of the people, after early discussions described by another source as “brutal.”
Formal interviews will take place once the deal is completed, two sources said.
UBS and Credit Suisse declined to comment.
Credit Suisse in recent years took part in deals that UBS perceived to be riskier, illustrative of a culture and a way of handling business that could clash with UBS’s, one source said.
What’s more, UBS doesn’t tend to lend to potential clients as Credit Suisse has often done, a move that can persuade some customers. That could make it harder for bankers to be as successful if they move across to UBS, two of the sources said.
Since announcing the state-sponsored rescue of its beleaguered smaller peer last month, UBS has said it plans to scale back Credit Suisse’s investment bank.
“There are clearly parts of Credit Suisse that have had a bad culture,” UBS Chairman Colm Kelleher told reporters on March 29. “Primarily, that was focused on the investment bank … We need to put everybody through a culture filter to make sure we don’t import something into the eco system that causes issues.”
The Swiss state is providing UBS with a 9 billion Swiss franc guarantee on potential losses from winding down the investment banking business. The trading operations will be managed in a separate non-core division, Kelleher has said.
As part of plans for the revamped investment bank, UBS is also considering letting go its own underperforming bankers as it hires top performers from Credit Suisse, two of the people said.
Speaking with analysts on March 19, UBS executives said they expect the deal to bring $8 billion in cost reductions by 2027, $6 billion of which would come from cutting the number of full time employees across the firms’ operations.
UBS and Credit Suisse, neighbours in their hometown of Zurich, for decades have competed head-to-head for mergers and initial public offerings across the world.
Credit Suisse employs about 17,000 across its investment banking and trading operations, according to recent media reports, while UBS has fewer employees, one of the sources said. The banks don’t publish the numbers.
UBS ranked 14th advising on mergers globally last year, behind 11th placed Credit Suisse, according to data compiled by Dealogic. In underwriting share sales, Credit Suisse also ranked ahead of UBS, at no. 10 while UBS ranked 19th, the data shows.
Yet in the U.S., where UBS has been lagging Wall Street peers, bringing in Credit Suisse bankers could provide an opportunity to quickly bolster its presence, according to one of the sources.
Credit Suisse grew its Wall Street business with the First Boston merger in 1988, creating CS First Boston. The Swiss bank doubled down on the U.S. in 2000 when it bought Donaldson, Lufkin & Jenrette.
Credit Suisse was planning to revive the First Boston brand by spinning off the investment banking operations into a stand-alone business with veteran banker Michael Klein at the helm. It had agreed to buy the investment banking business of M. Klein & Company LLC, for $175 million.
Since the merger was announced, UBS has examined how to void the contract with Klein in the cheapest way possible, reports say.
That would give UBS the opportunity to pick the bankers it wants to keep.
In addition to the U.S., the acquisition will allow UBS to accelerate planned growth in Asia Pacific, and in certain industries such as health care and technology, according to another source.
UBS has been racing to complete the takeover by as soon as the end of April.