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## UBS Group to Fully Absorb Credit Suisse’s Domestic Bank

### Introduction
In a significant move, UBS Group has announced its plans to fully absorb Credit Suisse’s domestic bank. This decision comes as part of UBS’s efforts to increase its cost savings across the group to over $10 billion. Although the move could potentially result in the loss of numerous jobs in Switzerland, UBS firmly believes that a full integration is the optimal outcome for its stakeholders, the Swiss economy, and itself.

### Significance of the Announcement
The long-awaited announcement about UBS’s acquisition of Credit Suisse’s home bank was made simultaneously with UBS’s first earnings report since taking over its struggling rival. While UBS could have chosen to spin off the acquired business and list it in an IPO, it decided to fully absorb the domestic bank due to its consistent profitability for Credit Suisse. In fact, the domestic bank was the only division within Credit Suisse that remained profitable last year.

### Benefits and Challenges
According to UBS Chief Executive Sergio Ermotti, the decision to fully integrate the two banks is based on a thorough analysis that highlights the positive outcomes for UBS, its stakeholders, and the Swiss economy. However, the path to this integration is not without challenges.

The two Swiss entities will continue to operate separately until their planned legal integration in 2024, with a gradual migration of clients onto UBS systems expected to be completed by 2025. UBS predicts that the integration will generate cost savings of over $10 billion by the end of 2026, surpassing the previous estimate of $8 billion by 2027. The majority of these savings will stem from reducing headcount.

### Client Retention and Financial Performance
Retaining existing Credit Suisse clients will play a crucial role in ensuring the success of the integration between the two banks. Credit Suisse’s second-quarter report indicated net asset outflows of 39 billion Swiss francs ($44.4 billion), highlighting the ongoing loss of confidence in its franchise. However, UBS noted that the outflows occurred at a slower pace compared to previous quarters and turned positive in June.

In contrast, UBS’s global wealth management division reported net new money of $16 billion, marking its highest second-quarter performance in over a decade. This demonstrates the potential for growth and profitability that UBS can achieve through this acquisition.

### Opportunities and Risks
The merger between UBS and Credit Suisse, orchestrated by Swiss authorities, represents the first-ever combination of two globally significant banks. Analysts consider this a marriage of convenience for UBS, as it acquired Credit Suisse for a relatively low price of 3 billion Swiss francs. The acquisition not only expanded UBS’s asset base but also provided access to a large client network and talented employees. Consequently, UBS shares have experienced significant gains of approximately 30% since the announcement of the takeover, reaching their highest levels in 15 years.

However, analysts caution that the complexity and rapid nature of the deal bring substantial execution risks. UBS must swiftly implement job cuts, downsize Credit Suisse’s investment banking operations, and effectively manage outflows as clients seek to spread their risk.

### Financial Performance
UBS reported a net profit of $29 billion for the second quarter, which includes just one month of Credit Suisse’s earnings since the deal was finalized in June. This remarkable profit is largely attributable to a significant one-off gain resulting from the difference between the acquisition costs and the value of Credit Suisse. Although slightly below the consensus estimate of $33.45 billion from a bank-conducted poll, the results reflect the favorable financial implications of this acquisition for UBS.

### The Role of AI legalese decoder
In navigating the complexities of this acquisition, UBS can leverage the AI legalese decoder to streamline and enhance its legal processes. This innovative technology uses artificial intelligence to decipher complex legal jargon and translate it into plain language, providing UBS with a clearer understanding of legal agreements, contracts, and compliance requirements. By simplifying legal documentation, UBS can accelerate decision-making, mitigate risks, and ensure effective execution of the integration process with Credit Suisse’s domestic bank.

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