UBS shareholders line up to criticise Credit Suisse deal at AGM

UBS’s takeover of Credit Suisse entails “a huge amount of risk”, the bank’s chair Colm Kelleher warned on Wednesday, as shareholders lined up to express concerns over the landmark deal — agreed just a fortnight earlier without their consent.

Speaking at UBS’s annual general meeting in Basel, Kelleher said the acquisition of UBS’s biggest rival was a “milestone” in global finance that would accelerate the bank’s existing strategy — with growth focused in the US and Asia — but cautioned that “this is not in any way an easy deal to do”.

“You cannot just put numbers together and reach a sum — you have to understand there is a huge amount of risk in integrating these businesses,” he said.

Swiss authorities triggered UBS’s acquisition of Credit Suisse roughly two weeks ago, in a $3.25bn emergency takeover cobbled together over the course of a weekend, to try to avert a potentially catastrophic banking collapse.

“We made a choice on behalf of Switzerland, UBS’s place in Switzerland, and on what was best for the global financial system,” said Kelleher.

“This is a Herculean task,” said Lukas Gähwiler, UBS vice-chair. “We had only 48 hours to conduct our due diligence, so many questions thus remain unanswered . . . Great uncertainty will remain.

“I can understand why people are bewildered, even angry,” he added.

The transaction will catapult UBS into position as the fourth-largest lender worldwide, with $5tn in assets under management, and confirm its place as the bank of choice for the world’s super-rich. But it will take years to accomplish and will come under significant political and regulatory scrutiny.

“We are concerned about this new giant bank,” said Vincent Kaufmann, chief executive of the Ethos foundation, a group representing more than 3 per cent of UBS’s shares at the AGM. “There is a huge concentration of risk in the Swiss market,” he pointed out, noting that 50 per cent of all mortgages in the city of Geneva will be held by the bank.

In taking over Credit Suisse, UBS was “taking over Credit Suisse’s risks . . . which we have warned about for years,” said Nicolas Götschmann of another large shareholder proxy advisor Actares. He asked for assurances that UBS would move swiftly to scale back risky investment banking activities.

UBS shareholders met just a day after Credit Suisse’s AGM in Zurich — the last in the bank’s 167-year history.

Executives there struck a more sombre tone. Chair Axel Lehmann said he was “truly sorry” that events had brought the bank to the end of its independent existence.

After more than two years of successive scandals, a weakened Credit Suisse fell victim to the sudden global liquidity shock that hit the financial system following the failure of Silicon Valley Bank in the US.

“The bitterness, anger and shock of all those who are disappointed, overwhelmed and affected by the developments of the past few weeks is palpable,” Lehmann said.

Some Credit Suisse shareholders — whose shares will be converted into UBS shares at a ratio of 22.48:1 — also turned up in Basel.

The price paid was “a cheek”, said Urs Stüdi, who lambasted Credit Suisse’s board for having wrecked the bank and forced it into UBS’s arms.

Martin Kaufmann, of Meilen on lake Zurich, said he had “never wanted to be a UBS shareholder”, but woke up on a Monday morning last month and discovered that he would be. “I would like to encourage everyone to buy UBS shares,” he said, before launching into a criticism of the derisory way Credit Suisse had been treated in the negotiations to save it.

Swiss shareholders of both banks repeatedly criticised remuneration practices and risk-taking.

“We need to learn the lessons from the Credit Suisse disaster,” said Martin Schütz, who inherited UBS shares from his mother. “We need to radically change the culture of bonuses . . . otherwise we will be waking up one day with UBS having gone down the drain as well.”