UBS set to carve up Credit Suisse after takeover day

ZURICH - UBS is set to finalise the takeover of Credit Suisse on Monday, but the hardest part is yet to come: Turning the arranged marriage of Switzerland's biggest banks into a success.

Reassuring the financial markets, customers, employees, the government and the public remains a challenge once the mega-merger is completed.

"From Monday onwards, UBS can start being proactive," Andreas Venditti, an analyst at Swiss investment manager Vontobel, told AFP.

Switzerland's largest bank must already have an idea of what bits of Credit Suisse it wants to keep, close or sell, but "so far they were limited in what they could do," he said.

On June 5, the two Zurich-based banks announced that the merger should be completed on June 12.

A merger this complex could turn out to be a nightmare, particularly given how little time UBS has had.

UBS expects an exceptional accounting gain of nearly $35 billion due to the difference between the purchase price and the recognised net assets of Credit Suisse.

UBS chief executive Sergio Ermotti has warned the coming months will be "bumpy" for the bank.

Takeover preparations have already brought "a first wave" of emotions and difficult decisions, but "other waves" are still to come, he told the Swiss Economic Forum conference in Interlaken on Friday.

He said jobs would be the trickiest part of the merger, adding that cuts were inevitable given the overlap in some activities.

Like UBS, Credit Suisse was among 30 international banks deemed too big to fail due to their importance in the global banking architecture.

But the collapse of three US regional lenders in March left Credit Suisse looking vulnerable, and its share price plunged more than 30 percent during trading on March 15.

The Swiss government, the central bank and financial regulators then stepped in and strongarmed UBS into a $3.25-billion takeover announced on Sunday, March 19, before the markets reopened the following day.

The government feared Credit Suisse would have quickly defaulted and triggered a global banking crisis.

The deal includes guarantees for UBS in case there are any nasty surprises in the Credit Suisse cupboards.

UBS and the Swiss government signed the guarantee contract on Friday, which can reach up to nine billion Swiss francs ($9.85-billion), if the losses exceed five billion francs.

The takeover terms and the size of the resulting megabank are causing serious concern in Switzerland.

The parliament in Bern has set up an extremely rare commission of inquiry, with lawmakers set to investigate how the emergency rescue was stitched together in double-quick time.