Worried UBS investors have urged the Swiss lender to avoid sweeping job cuts and inflating executive pay as they raised concerns about the creation of a mega-bank after the emergency takeover of smaller rival Credit Suisse.
Addressing more than 1,100 shareholders at the St Jakobshalle arena in Münchenstein, near Basel, UBS bosses said they understood why investors may be “bewildered or even angry” after the surprise deal last month, following weeks of panic about the health of the banking sector.
“It was a historic day and a day we hoped would not happen,” the chair of UBS, Colm Kelleher, said. “Yet it is a significant milestone, not only for UBS and Credit Suisse but also for Switzerland, for the global financial industry.”
While bosses acknowledged the government-brokered deal – which was executed with only 48 hours of due diligence – came with risks, they defended the takeover and said it presented a business opportunity for UBS. However, bosses said all options were on the table such as a future split or spinoff of Credit Suisse assets.
Some shareholders acknowledged the potential benefits of the takeover but said they were “concerned about this new giant bank”, which will be the fourth largest in the world, with a combined $5tn (£4tn) in invested assets, including the possibility of unjustified pay hikes and job cuts.
“This will in no way justify any inflation of remuneration,” one shareholder said, urging bosses to be prudent even as they prepared to manage a much larger bank. “The current plans are already extremely generous,” the shareholder added.
“We need to learn the lessons from the Credit Suisse disaster,” another investor said. “We need to radically change the culture of bonuses – [which are] the wrong incentives – otherwise, we’ll be waking up one day with UBS having gone down the drain.”
Investors also raised the alarm about thousands of potential job cuts as bosses try to get rid of duplicate roles.
“Those synergies you were referring to would potentially cost more than 30,000 jobs worldwide,” a shareholder said, referring to recent press reports. “These social consequences, also in Switzerland, could be dramatic and the reputation of UBS could also suffer.”
“Banking is people, don’t forget that,” another investor added.
The vice-chair of UBS, Lukas Gähwiler, said it was “simply too soon for any speculation” on potential job cuts but added that the takeover was “a Herculean task” that in the short term would need more people.
Shareholders also feared the mega-bank could harm competition, including within the Swiss mortgage market, adding that UBS should “consider a possible spinoff in one or two years”.
Kelleher said the board was not ruling out a future split of the business, adding: “There are various options that we’re looking at. We need to complete the deal first. We need to stabilise the situation.”
Credit Suisse was sold to UBS in March as panic over the health of the global financial system increased after the collapse of Silicon Valley Bank earlier in the month.
By then, Credit Suisse had already been struggling to keep customers and generate profits after a string of scandals, compliance issues and bad financial bets.
Confidence in the bank was nearly wiped out in mid-March after its largest shareholder, the Saudi National Bank, ruled out providing further funding because of regulations that in effect capped its investment.
The Swiss authorities stepped in, originally offering a CHF 50bn (£45bn) line of credit, and eventually ushering in a $3.25bn takeover by Credit Suisse’s larger domestic rival UBS four days later.
Credit Suisse shareholders used the bank’s last-ever annual general meeting on Tuesday to express their own anger over the cut-price takeover deal, blocking executive pay plans and calling for board members to be “put behind bars”.
The bank’s chair, Axel Lehmann, apologised, saying bosses had plans to turn Credit Suisse around but were “thwarted” by market panic. He said the only alternative to the takeover would have been bankruptcy.
“We wanted to put all our energy and our efforts into turning the situation around,” Lehmann said. “It pains me that we didn’t have the time to do so. In that fateful week in March our plans were thwarted. And for that I am truly sorry.”