UBS: Restarting Share Buybacks Amid Credit Suisse Absorption
One of the world’s leading banks, UBS, has announced the resumption of share buybacks and greater cost-saving measures as it begins its absorption of fallen rival Credit Suisse.
Last year, Credit Suisse was one of several major global banking collapses, alongside Silicon Valley Bank (SVB), at a time when soaring inflation tested the liquidity of some of the world's leading financial institutions.
Indeed, Credit Suisse’s collapse was particularly significant. It was considered one of 30 banking institutions deemed systemically important globally.
Its leading Swiss rival, UBS, stepped in to acquire it for US$3.3bn at the time of its collapse, helping avoid any potential devastation to the global financial system.
UBS: Necessary measures to accommodate Credit Suisse
Now that the time has come for UBS to integrate Credit Suisse into its wider organisation, share buybacks and cost-saving efforts are now necessary for UBS' efforts to stay profitable.
In fact, UBS says it now expects to generate US$13bn in cost savings by the end of 2026, with half of that expected to be saved by the end of 2024.
These cost-cutting targets are up on previous goals to save US$10bn by 2026, on account, primarily, of the Credit Suisse absorption.
However, UBS says more than half of these savings will be made possible by a reduction in headcount, pointing to the automation of processes usually completed manually, as redundancies rise.
Indeed, UBS had 120,000 employees under its wing at the time of the merger, a figure that shrunk to 112,000 at the end of 2023.
Although it has begun the integration of Credit Suisse, there is still difficult work ahead to fully complete the process, namely executing many more job cuts and combining UBS’ IT system with Credit Suisse's.
On the announcement of its share buybacks relaunch, UBS CEO Sergio Ermotti, says: "With enhanced scale and capabilities across our leading client franchises and improved resource discipline, we will drive sustainable long-term growth and higher returns.”
UBS’ share buybacks scheme is, in fact, overdue, and begins with up to US$1bn in the second half of 2024 after the absorption of Credit Suisse is finalised fully.
The bank’s previous US$6bn share buyback scheme was expected to run from 2022 through to March 2024 but was shelved following the Credit Suisse acquisition last year.
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