On Wednesday, UBS will hold its first shareholder meeting following its forced merger with smaller rival Credit Suisse, amid the smaller lender’s near-collapse.
Last month, in a shotgun merger, Swiss banking authorities announced that UBS had agreed to purchase its smaller rival in a bid to stave off broader turmoil in the banking sector which would have resulted due to its collapse.
Following a string of regulatory failures and more generalized scandals, Credit Suisse saw a run on its deposits following the collapse of three regional lenders in the United States. Increasingly, both investors and depositors were growing uneasy regarding the ability of banks to liquidate devalued assets in the face of deposit runs while maintaining financial stability.
As Credit Suisse teetered, with the reputation of Swiss banking at risk, the Swiss government turned to UBS, brokering a deal whereby UBS would purchase Credit Suisse for 3 billion francs ($3.3 billion) with the government and the Swiss central bank contributing 200 billion francs in support and guarantees.
The deal incensed shareholders of UBS, who worried their well-run bank would be taking on liabilities from Credit Suisse, as well as Swiss citizens, who feared the cost of the deal to their government, and them by extension. A majority of Swiss citizens opposed the deal, according to a survey by political research company gfs.bern. It also angered bondholders in Credit Suisse who saw the value of their bonds wiped out as part of the deal.
On Wednesday, shareholders will finally get the opportunity to air their opinions on the matter, although some analysts have speculated many may avoid rocking the boat, for fear of causing more turmoil and dampening sentiment in the sector further.
In 2022, following strong inflows in wealth management, the bank’s flagship division, UBS reported $7.6 billion in profits. Now, with the reputation and future of Swiss banking at stake, the bank must integrate Credit Suisse into its operations without undermining its strong performance.
The process has already begun. The bank has rehired Sergio Ermotti as CEO, to take the helm during the massive takeover. The move was seen as a surprise, designed to take advantage of Ermotti’s experience rebuilding the bank after the 2008 financial crisis.
Although Ermotti was scheduled to begin work on Wednesday, he is not scheduled to take part in the shareholder meeting. In his place, outgoing CEO Ralph Hamers will take the stage alongside Chairman Colm Kelleher.
