The Purchase of Credit Suisse by UBS Leads to Substantial Financial Gains
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In a move that shocked the financial world, Swiss banking giant UBS agreed to acquire troubled rival Credit Suisse five months ago. At the time, Credit Suisse was on the brink of collapse due to a liquidity crisis, and analysts predicted it would soon be the next bank to fall like Silicon Valley Bank. With buyers scarce, UBS eventually agreed to pay a relatively low price of $3.4 billion for Credit Suisse, with the Swiss government offering some backing and liquidity support.
Fast-forward to the most recent quarter, and it's clear that the deal has paid off for UBS. The bank reported a staggering $29 billion net profit, making it the most profitable quarter ever for any major bank. Analysts even predicted an even larger gain of $33 billion. However, Credit Suisse still recorded a $10.6 billion loss for UBS in the same quarter, but this was partially offset by $16 billion in net new assets from UBS's core wealth management business.
So how did UBS manage to turn a profit from such a struggling bank? Well, part of it was the $29 billion difference between the value of Credit Suisse's assets and the price UBS paid for it, known as negative goodwill. According to the Financial Times, some analysts even expected an even bigger gain.
UBS has also been busy integrating the two banks, with a full integration not expected until the end of 2026. It remains unclear if Credit Suisse will continue as a global brand after that. The merged bank, with total assets now over $5 trillion, is planning a significant slimming down, with reports suggesting a potential workforce reduction of up to 30%.
The acquisition has not been without its challenges, however. UBS has already cut more than 10,000 jobs since the deal, with up to 3,000 more on the way. Additionally, the deal has been the subject of several lawsuits, including one filed by bondholders claiming they lost billions as a result of the acquisition.
In summary, UBS's acquisition of Credit Suisse has been a major event in the financial world. While it's been a profitable move for UBS, it has also come with its fair share of challenges. But with the bank aiming for a full integration by the end of 2026 and significant cost savings already achieved, it seems like UBS is well on its way to turning the struggling bank around.
After securing a profitable quarter with a net profit of $29 billion, UBS executives discussed their investment strategy, revealing plans to allocate a portion of the funds gained from the acquisition of Credit Suisse into various finance projects. In light of the substantial net new assets generated by the merger, analysts predicted that future investments in finance and technology could yield even higher returns.
