UBS-Credit Suisse deal averts worse global crisis, but puts Indian job market at risk

Logos of Swiss banks UBS and Credit Suisse seen on an office building in Zurich, Switzerland March 19, 2023. (Image Source: REUTERS/Denis Balibouse)

By agreeing to acquire Credit Suisse (CS), Switzerland’s largest bank, UBS, has averted a major global banking crisis. But there are some fine prints between the lines. Some ripples of the mega merger will reach the Indian shores and have an impact on the job market.

"Let me be very specific on this," UBS Chairman Colm Kelleher said on Sunday. "UBS intends to downsize Credit Suisse’s investment banking business and align it with our conservative risk culture.” Kelleher's statement sparked panic among CS employees, who had been waiting anxiously since the embattled Swiss lender planned to cut down about 9,000 jobs before the $3-billion acquisition deal with UBS.

Narrowing our view down to the Indian operations of both the banking majors, one can spot a host of red flags waving.

UBS and Credit Suisse together have around 14,000 employees in their technology back offices across three Indian cities, including Pune. However, role rationalisation is very much around the corner, which puts many of these 14,000 jobs at risk of redundancy, as rightly observed by several industry experts.

"They will probably not need that many people; so rationalisation is inevitable," a banker familiar with the developments told the Economic Times recently. "On the banking side, UBS was already very thin in India; so the larger question is whether it would want to continue with Credit Suisse operations, or will also reduce them in line with its capital-light philosophy."

“India & Pune are likely to be hit by the merger as most of jobs are backend operation jobs & likely to have duplication with #UBS,” Vinit Deo, Founder of financial advisory firm Posiview Ventures, tweeted.

UBS on Sunday announced its plans to cut costs of the combined business by about $8 billion by 2027, which is nearly half of what Credit Suisse spent last year.

Kelleher expressed interest in retaining Credit Suisse's profitable Swiss unit as well as the wealth management division while being less enthusiastic about its investment banking segment. Now, in India, Credit Suisse offers wealth management, investment banking, and brokerage services through its sole unit in the country. It has a relatively small presence here. The business has been shrinking for the last three years, which makes us wonder whether UBS will invest any resources to run the CS India unit at a time when it is zeroing in on cost reduction.

On the other hand, being mostly focused on wealth management and other service-based offerings, CS had a capital adequacy ratio of 60.02 percent as of March 2022, which is better than most Indian banks, as pointed out by Business Today. Thus, UBS would not need to raise immediate additional capital to run operations.

However, there will be more clarity on layoffs by the end of this year when the CS-UBS transaction completes.

Also, a spokeswoman told Bloomberg that payroll arrangements will remain unchanged as of now and bonuses will be paid on March 24 to Credit Suisse staff as usual.