Few topics are currently occupying the Swiss financial industry as the impending wave of layoffs at UBS. According to media reports, a brutal savings program is imminent. What is behind it?
The takeover of former competitor Credit Suisse will unleash synergies and cost-cutting potential as UBS eliminates overlap in products, services, and business units.
To harness the growth opportunities resulting from the merger, UBS needs to introduce new structures and processes and implement savings plans, resulting in job cuts as an unavoidable byproduct. The job-cutting program, subject to weeks of media speculation, could slash 30,000 to 40,000 jobs worldwide and is expected to start soon.
Who is Affected and How?
It's been clear from the start that UBS intends to drastically reduce Credit Suisse's loss-making, volatile, and capital-intensive investment banking business. Many Credit Suisse investment bankers have already left the bank, and the exodus of talent continues in Asia.
To what extent the job cuts will affect other business units remains nebulous for now, and it's unclear how many Credit Suisse employees will lose their jobs. And last but not least the question is to what extent will the Swiss banking industry, and Zurich in particular, be affected? Questions upon questions, to which the public would like answers and clarity.
«Brutal Savings Program»
The «Sonntagszeitung» (in German, behind paywall) reported over the weekend that UBS prepared a «brutal savings program,» with managers said to have concretized austerity plans in July. With the «Reduction in Force» (RIF) downsizing program, the merged bank wants to cut 30 percent of its workforce. The plans have been drawn up by the respective heads of the UBS and Credit Suisse business units.
According to the «Sonntagszeitung», it's apparent many bank employees of the old UBS will have to fear for their jobs, although significantly more Credit Suisse employees are said to be facing the axe. Additional and significant savings measures are to take effect, including cuts for expenses, travel, software licenses, and consultants resulting in potential savings between 10 and 20 percent.
Reading the Script
A UBS spokeswoman wouldn't comment on the rumored savings plans when asked by finews.com, and declined to comment on the article.
The planned job cuts are likely to be drastic. The script for takeovers usually calls for the buyer to keep at least one-third of the employees of an acquired company on the payroll, Reto Jauch, managing partner of executive search firm Schulthess, Zimmermann & Jauch in Zurich, told finews.com earlier this year.
That provides a certain guarantee the new organization will work. «In the case of the UBS/Credit Suisse transaction, the reverse leads to up to a third of the employees at UBS being at risk - especially in management functions,» Jauch said.
More Clarity at the end of August
That leaves shareholders, politicians, employees of the two financial institutions, as well as competitors who want to poach talent from UBS, eagerly awaiting the interim report on the first half of the year on August 31.
UBS CEO Sergio Ermotti and Chairman Colm Kelleher are likely to provide information on integration progress and further measures as part of the half-year results. However, they are unlikely to show their cards too closely, lest they provoke displeasure in Swiss political circles. But perhaps the figures will show how successful the integration program has been.
