UBS’ Ermotti may have pulled off deal of the decade with Credit Suisse

After an intense weekend of negotiations in March 2023, Swiss banking giant UBS agreed to buy its embattled rival Credit Suisse.

Despite the attractive purchase price of $3.2 billion, investors were concerned about whether UBS would manage to turn around Credit Suisse’s investment banking business — an old source of problems. UBS had also become one the biggest banks in Europe, raising political and regulatory fears.

At the time, investors were “very concerned” about the complexity of the deal and whether UBS would make it work, Bruno Verstraete, founder of Lakefield Wealth Management, told CNBC by email.

“When a healthy individual is sleeping next to someone with a severe flu, they are likely to contract it as well,” he said.

The acquisition was so complex that UBS decided to change leadership and bring back former CEO Sergio Ermotti to the bank’s helm to oversee the merger.

“Given the market conditions, political dynamics, and time constraints under which the deal was executed, investors were acutely aware of the significant risks associated with acquiring unknown liabilities,” Verstraete added.

Now, 18 months later, that sentiment is changing, and many agree this is the deal of the decade.

“The merger with Credit Suisse currently goes along the planned milestones and timelines, and the UBS leadership under CEO Sergio Ermotti has been absolutely right to push ahead ambitiously,” Beat Wittmann, chairman at Porta Advisors, told CNBC by email.

UBS concluded the merger of the parent companies in May, then finalized the transition to a single U.S. intermediate holding in June. In July, it fully merged the Swiss entities of Credit Suisse and UBS. The entire process is expected to wrap up in 2026.

“The integration process is being conducted in a typically Swiss manner — disciplined, pragmatic, and seemingly on track. Calm and trust have been restored,” Verstraete said.

The dissipating concerns were also clear when UBS reported second-quarter results in August, with analysts changing tack to focus on the actual business performance, rather than on the details of the merger.

UBS‘ announcement of faster progress on cost savings also pleased investors. The bank now expects to reach $7 billion in cost savings in 2024, or more than half of UBS’ $13 billion target for the whole duration of the merger process by 2026. The figures compare with a 2022 baseline.