Damage assessment is still ongoing resulting from the rescue takeover of Credit Suisse by UBS. BAK-Economics has made an initial forecast. At least for Switzerland.

The lead sentence of a report from Basel-based BAK gets to the crux of the matter: «The takeover of Credit Suisse by UBS averts greater damage to the Swiss economy», according to the analysis (in German) of the economic intelligence firm released Tuesday.

Then the all-clear is sounded. For the Swiss economy as a whole, the move has only limited consequences, with «the negative effects remaining largely limited to the banking sector.»

Value Creation Loss

Still, analysts reckon the loss of value added suffered so far is likely to be permanent for the Swiss banking industry. «There is uncertainty as to how much the damage to the image associated with the Credit Suisse case will affect the further development of the international wealth management business of Swiss banks.»

The BAK's analysis is limited to Switzerland where a total of 16,700 are employed of a total of over 50,000 Credit Suisse employees globally.

A Third Fewer

Together, the banks would have an estimated 37,000 full-time equivalent (FTE) jobs according to BAK which concludes «the rationalization potential of the two combined banks is on the order of 9,500 to 12,000 jobs.» That would mean job cuts in Switzerland of up to nearly a third by the time the integration is complete.

Nevertheless, the BAK emphasizes a sudden increase in the unemployment rate is not to be expected. The figure cited represents 0.3 percent of total Swiss FTE positions. The changes will be most noticeable in the canton of Zurich where the rationalization potential is estimated between 6,500 and 8,000 jobs, corresponding to 0.9 percent of all jobs in the canton.

To be sure, the rationalization process is likely to take several years. Some of the affected employees will easily find new jobs in a labor market characterized by a shortage of skilled workers.

GDP Forecast Unchanged

No noticeable impact on economic growth is expected, with BAK continuing to forecast real GDP growth of 0.7 percent for 2023 and 1.6 percent for 2024.

The negative effects of the Credit Suisse debacle will largely be limited to the banking sector, even if the outflow of customer funds has now been halted.

The merger has significantly reduced the risk of a general banking crisis, and the supply of financial services to Credit Suisse clients will be maintained without restriction.