UBS calls in McKinsey to explore merger with Credit Suisse

22 September 2020 3 min. read

Swiss financial giant UBS has reportedly tapped consultants from McKinsey & Company to draw up plans for a mega-merger with rival wealth manager Credit Suisse. The move would create one of Europe’s largest financial institutions, and could boost the efforts of both to gain valuable market share in Asia.

With annual revenues of more than $30 billion, the UBS Group is a multinational investment bank and financial services company founded and based in Switzerland. Co-headquartered in the cities of Zürich and Basel, it maintains a presence in all major financial centres as the largest Swiss banking institution in the world, with large positions in the Americas, EMEA, and Asia Pacific markets.

Despite this, UBS ranked notably lowly in a list analysing the financial metrics of Europe’s largest banks. According to the Roland Berger study, alongside German competitor Deutsche Bank, UBS was underperforming its peers on a range of financial metrics – showing UBS still plenty of room for growth in terms of its size and influence.

UBS calls in McKinsey to explore merger with Credit Suisse

New reports suggest designs to drive the bank to new heights may already be being formed, with the news that UBS Chairman Axel Weber seems to have mapped out a merger with Credit Suisse that could create a unified Swiss giant in wealth management and investment banking.

While no formal discussions are understood to have taken place with Credit Suisse or with managers or directors at UBS, according to people briefed on the matter Weber has used external management consultants to examine the potential for a deal.

Weber is said to have already warned Finance Minister Ueli Maurer and the Federal Financial Market Supervisory Authority of the planned merger, codenamed “Signal,” which was devised under the advice of consultants from McKinsey & Company. The potential deal would see Weber remain at the head of the combined entity, and could come as soon as 2021, according to industry blog Insider Paraplatz.

Credit Suisse Group is a global wealth manager, investment bank and financial services firm founded and based in Switzerland. Headquartered in Zürich, it maintains offices in all major financial centres around the world, and has annual revenues of more than $24 billion.

With each undergoing leadership change and coming under pressure to cut costs, as the coronavirus pandemic prompts renewed interest in bank consolidation across Europe, a mega-merger could see the banks consolidate in a way that would enable both to boom in a future economic recovery.

McKinsey, a consultant for both multinationals for years, has declined to comment as it does not speak publicly on client work. However, an unnamed source speaking to Insider Paraplatz from McKinsey did say that one of the multinationals was apparently involved in something that "would overshadow everything that has existed in Europe's financial industry.”

Rejuvenating old plans

A merger between the two heavyweights has reportedly been considered by executives at both banks over the years, especially as their goals and methods have become ever more synchronised. Both have redefined themselves as global wealth managers in recent years, for example, as their investment banking businesses have come under pressure from US competitors, while they in turn have focuses more on the lucrative Asian market.

What previously stopped such talks from progressing was the fear that anti-trust barriers would have hamstrung any potential deal between UBS and Credit Suisse. However, in recent years European regulators have become more open to giving the green light to M&A deals in the banking sector as a way for struggling lenders to achieve economies of scale.

Meanwhile, low interest rates and expected losses from the current Covid-19 pandemic have added weight to calls for such deals, as Europe looks to lenders for help in a future economic recovery.