UBS chairman Axel Weber has mapped out a merger with Credit Suisse that would create a unified Swiss champion in wealth management and investment banking.

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

The planning comes at a time of upheaval for both banks, with each undergoing leadership change and coming under pressure to cut costs, as the coronavirus pandemic prompts renewed interest in bank consolidation across Europe. Both banks declined to comment on the discussions.

A top-10 shareholder at one of the banks said he had not been consulted about a potential deal and would not be supportive. “There is a case for partnering in some of the businesses like investment banking markets [where] they don’t have the same critical mass as their US competitors,” he said, “but a full merger I cannot see the logic.”

A merger between the two heavyweights of Swiss banking has been considered by executives at both banks over the years, but the fear of hitting antitrust barriers has prevented talks from progressing.

However, 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. Low interest rates and expected losses from the pandemic have added weight to calls for such deals.

Shares in Credit Suisse rose 4 per cent while shares in UBS were up 2.6 per cent on Monday following news of the merger planning, which was first reported by Swiss blog Inside Paradeplatz.

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Both Swiss banks have redefined themselves as global wealth managers in recent years, as their investment banking businesses have come under pressure from US competitors. They each have focused attention on the lucrative Asian market.

Credit Suisse shares have shed 22 per cent this year, giving the bank a price-to-book value of 0.5 times, while UBS shares are down 8 per cent this year, valuing the bank at 0.8 times its book value.

Mr Weber’s opposite number at Credit Suisse, Urs Rohner, is due to step down next year. This month Ralph Hamers joined UBS, with the former ING boss due to take over from Sergio Ermotti as UBS chief executive in November.

At Credit Suisse, insider Thomas Gottstein took over as chief executive in February from Tidjane Thiam after a damaging corporate espionage scandal. Finma, the Swiss financial regulator, said this month it was escalating its enforcement proceedings against the bank over the surveillance.

Via Financial Times