Jobs at risk after UBS takeover of Credit Suisse, as markets grow calmer – business live

Key events

The FTSE 100 index is continuing to climb in London.

It’s now up 96 points, or 1.3%, with NatWest and Barclays both up 5% and Lloyds Banking Group. up 4.3%.

The smaller FTSE 250 index, of medium-sized companies, has gained 1.4%.

Crisis fears have eased, for now, says Steve Clayton, head of equity funds at Hargreaves Lansdown:

“Markets took a breather from fretting about banking contagion overnight. Wall Street saw modest rallies across leading industrial, financial and technology sectors as investors dissected the detail of the rescue of Credit Suisse by longstanding rival, UBS. The deal has combined Switzerland’s two leading banks, both of them leading players in the international investment banking arena. Both, of course, are also substantial private bankers handling the affairs of rich families worldwide.

Initially sceptical of the deal, the market’s mood changed over the course of yesterday, with UBS shares ending higher after a sharp initial fall.

European bank stocks are on track for their biggest one-day gain in five months.

The Stoxx 600 banks index, which tracks bank shares across the region, is up 3% so far this morning, which would be the best day since last October.

The marriage between UBS and Credit Suisse leaves “much uncertainty and nervousness among employees” who are unsure whether they will be let go, says Victoria Scholar, head of investment at interactive investor.

Up to a third of the 120,000 jobs in the combined UBS / Credit Suisse group could be let go. According to the Financial Times, tens of thousands of staff could be cut with Credit Suisse employees most at risk. A major restructuring and cost cutting programme was already underway at the embattled lender before the Swiss authorities arranged the rescue deal with 9,000 jobs cuts planned as well as a major scale back of its investment bank.

Southeast Asia could be the region most at risk to job cuts given that it has the biggest overlap in terms of investment banking and wealth management teams.

Meanwhile legal action is being considered against Credit Suisse after its $17 billion worth of AT1 bonds were written down to zero, Scholar adds:

PIMCO reported lost about $340 million on its Credit Suisse AT1 bonds according to Reuters. One analyst at Goldman Sachs said there is concern about ‘permanent destruction in demand’ in the CoCo bond market. Bondholders typically rank above shareholders in the repayment pecking order when a company fails yet in Credit Suisse’s case its convertible bondholders have seen their investments wiped out.

Much uncertainty remains around the future of the Swiss banking group with the potential for litigation, job cuts, restructuring and outflows. The first step must be to shore up confidence and convince shareholders of potential synergies from the combined group.

Although UBS shares initially reacted negatively on Monday, the stock regained ground and the mood music has brightened across stock markets today as investors ruminate over the fact that a full-blown collapse of Credit Suisse and another Lehman moment has at least been prevented in Switzerland, stemming broader banking contagion and a domino effect on the Swiss economy.”

Moody’s credit rating agency downgrades outlook for UBS to negative

Rating agency Moody’s has cut the outlook on UBS Group’s [UBSG] debt to negative following its takeover of Credit Suisse.

Moody’s has affirmed UBS’s current credit ratings, but lowered the outlooks on its long term deposit and senior unsecured ratings to negative from stable.

A negative outlook is an indication that a rating may be lowered in future.

The rating agency says it took this decision following UBS’s deal to buy Credit Suisse for 3bn Swiss francs:

The action balances on the one hand the advantageous financial terms in terms of liquidity and capital together with the long-term potential for franchise enhancement, and on the other hand the complexity, extent and duration of the integration.

Moody’s points out that UBS faces “significant financial, cultural and franchise related” challenges as it tries to integrate Credit Suisse into its business.

They include:

The need to retain key CSG personnel while the transaction is underway; the need to minimize the loss of overlapping clients in its Swiss banking and wealth management businesses; and the need to unify the cultures of two somewhat different organizations while ensuring that overall risk appetite and controls are both enhanced and or maintained at levels defined by UBSG.

Shares in UBS opened 3% higher in Zurich, as investors continue to digest its takeover of Credit Suisse (whose shares were slightly higher in early trading).

Shares in two of Germany’s largest banks, Deutsche Bank and Commerzbank, are both up around 3% in early trading.

Shares open higher in London

Shares have opened higher in London, and across Europe, as calm returns to the markets after some rather choppy sessions.

The FTSE 100 index of blue-chip shares has jumped by 58 points, up 0.8%, to 7460.

Barclays is leading the way, up 2.5%, with NatWest (+2.2%) and Lloyds Banking Group (+2.2%) also in the top risers.

Michael Hewson, chief market analyst at CMC Markets UK, cautions that:

Sentiment is likely to remain fragile over the next few days until we see the outcome of tomorrow’s Fed meeting, and their take on recent events, while on Thursday we get the latest central bank decisions from the Swiss National Bank and the Bank of England.

Introduction: Jobs at risk after UBS takeover of Credit Suisse

Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.

As the dust settles following the emergency rescue of Credit Suisse by UBS, fears of heavy job losses are growing.

The shotgun wedding hammered out between the two Swiss banks last weekend will create a 120,000-strong financial institution – and it already seems inevitable that the workforce will shrink.

Switzerland’s financial sector already anticipating a heavy hit from the contentious takeover, with the Swiss Bank Employees Association warning yesterday that “the jobs of very many employees are at stake.”

Credit Suisse’s domestic business and its investment bank, which collectively employ more than 30,000 staff, are expected to bear the brunt of the cuts, the Financial Times reports this morning.

According to people familiar with UBS’s plans, as much as a third of the 120,000 jobs in the combined group could be at risk, as UBS winds down much of the investment bank and removes overlapping roles in Switzerland.

The FT explains:

Credit Suisse, which at the end of 2022 employed just over 50,000 people, was already in the middle of a wide-ranging job-cutting drive, with 4,000 positions slashed so far this year.

But the takeover is expected to result in many of Credit Suisse’s 17,000 investment bankers losing their jobs as UBS winds down most of the unit.

On Sunday night, UBS chairman Colm Kelleher explained that he plans to run down the investment banking part of Credit Suisse. UBS itself operates an investment bank-lite model, more focused on asset management which is less risky.

Kelleher (who apparently squeezed in a beer at Zurich’s James Joyce pub during the weekend negotiations to rescue Credit Suisse), told reporters on Sunday evening that it was “just too early to say” what would happen about job cuts, adding:

“We will be considerate employers, but we need to do this in a rational way, thoughtfully, and when we’ve sat down and analysed what we need to do.”

The former chief executive of UBS in the UK, Mark Yallop, said he thinks job losses will be “inevitable”. He told Radio 4’s Today programme on Monday they will probably be concentrated in Credit Suisses’ investment banking business, and in in middle-office, technology and operational roles.

Some Credit Suisse bankers aren’t planning to hang around and see the axe fall, though.

Headhunters and rival lenders from Singapore to London to New York have been fielding calls over the past few days from anxious Credit Suisse staff, Bloomberg say, adding:

One firm in Singapore handled questions from some 30 mostly Credit Suisse private bankers about available jobs on Monday, while another recruiter in Hong Kong has been talking to more than 20 senior investment bankers since last week, the people said, asking not to be identified discussing confidential information.

Meanwhile, a firm that’s focused on managing director hires said it has received such calls since late Friday, especially for the wealth area.

Financial markets appear calmer today, after a volatile session on Monday. Europe’s main stock market indexes are expected to rise this morning.

Investors were initially panicked yesterday that some Credit Suisse bond holders were being wiped out while shareholders would receive a payment, inverting the usual order of business.

But UK and European officials calmed the markets, by insisting they would stick to the usual heirachy.

• 7am GMT: UK public finances for February

• 9.45am GMT: Treasury Committee gathers economist views on Spring Budget

• 10am GMT: ZEW index of German economic sentiment

• 2pm GMT: US existing home sales