Should I stay or should I go? What data execs can expect from the UBS–Credit Suisse merger

UBS is reportedly targeting $8 billion in savings by 2027 by stripping out costs over the course of integrating rival Credit Suisse following its impromptu takeover of the firm, which faced serious losses and the risk of insolvency. Those savings could be gained from any area of the bank, but the bulk are likely to come from every firm’s biggest asset and expense: personnel, including the data and technology staff who support anyone across the business who consumes data in any form.

With UBS expected to take a scythe to thousands of banking jobs—Credit Suisse had already outlined plans to shed some 9,000 jobs last year—many in the smaller firm’s data and technology organization may believe the writing’s on the wall. But while some may be feeling desperate to jump ship, others say the survivors are likely to be those who stay on board and steer the limping vessel into its new home port.

“I don’t think data and tech jobs will be the first to go. I think manual, relationship-based jobs will come first,” says Bob Iati, managing director at research firm Burton-Taylor International Consulting. “Longer term might come cuts in operations because you want to keep those in place initially to manage the transition. Typically, those ops groups and other ‘cost centers’ get slimmed down only after they finish merging the organizations.”

There are resourcing synergies to be realized in the medium term, but what we tend to see is a large temporary uptick in contractors and consultants being utilized to integrate the two sets of systems

Damian McCarthy, Boston Consulting Group

Tech and data roles, Iati says, broadly tend to be affected last of all because of how useful they can be during the integration process. But, he says, there are areas of overlap surrounding data—such as procurement, legal, and data operations functions—where the merged firm will inevitably seek to eliminate duplicate roles.

“There’s a lot of duplication around managing how data is used, stored, and distributed within the organizations. And if you double the data usage, you don’t need double the people to manage it. Data is becoming more automated, anyway, so every day we come closer to having outdated processes. So, I think people in those [duplicate] roles are the ones at risk,” Iati says.

If the combined entity cuts swaths of front-office staff—which is entirely possible, given a high degree of overlap between the two Swiss firms—then those people and their need for data services goes away, as does the need for data professionals to service those needs. But this may not happen immediately; rather, it may occur over time as the integration evolves between different phases and requirements change.

Resourcing synergies will be realized in the medium term, but for now, the industry should expect to see a temporary but large uptick in the utilization of consultants and contractors to integrate the two sets of systems, says Damian McCarthy, managing partner at Expand Research, the operations and technology benchmarking and research arm of Boston Consulting Group.

“From previous cases, after a couple of years post-merger, only about a third of the total possible synergy has generally been realized, and the quick wins on software/shared services contracts make up most of these but are offset by some higher temporary human resources costs,” McCarthy says. “The balance comes in the medium term—three to seven years, sometimes longer—when firms are able to release those on temporary contracts after systems integration is complete, as well as manage attrition for those in duplicate roles, such as application service desk/maintenance.”

Attrition, or not replacing people when they leave, is considered preferable because it doesn’t incur the cost of severance packages, and avoiding widespread cuts can keep staff morale higher—unless, of course, the cost-saving opportunity outweighs those points. But in some cases, there may be targeted staff culls. And retention of specific data or technology teams may depend on which teams or products are chosen to remain in place at the new organization.

They don’t want everyone to jump ship. So they might say, ‘We’ll guarantee your job for the next year, give you the same bonus as last year, and offer 1.5 times your salary,’ so that employees will be happy to stick around

Former bank data executive

“Some firms will pick individuals, and others will focus on teams. For example, if each of the firms uses a different derivatives system and the combined firm ends up keeping one, then most likely they will keep the team supporting the chosen system,” says Peter Serenita, a former chief data officer at JP Morgan and HSBC and now CEO of his own firm, CDO Advisory Services.

The value of data roles

However, sources say, prospects for skilled data professionals at both organizations look bright, at least in the near future, as the firms go ahead with their integration.

“Firms usually build an [internal] merger organization to track progress. A data person actually becomes very valuable during this time because they have the skills to pull the data from the two firms together,” Serenita says. “A firm with a good, mature data capability can really aid the merger and raise the profile of that organization.”

Indeed, while management doesn’t usually pay attention to the finer points of data management beyond its status as most firms’ largest expense, Serenita says that during a merger, C-level executives need to be fully aware of their exposures and how information from both firms can be integrated to provide a full understanding of the risks and opportunities facing the combined business. For example, if each firm has a $100 million loan to one specific company, does the merged entity have the same risk appetite for a combined $200 million exposure?

“The finance and risk areas tend to be the initial focus, because they need to understand the combined financials and risks,” Serenita says. “The CRO and CFO—those folks do understand the data they need to do their jobs … so the business (finance) side and risk organization, especially, are usually very engaged in decisions about data.”

In fact, while some might be worried about layoffs and pay cuts, the firms may offer additional benefits to keep staff during the transition. And while it may look bad in terms of public perception, it’s an essential step to retain knowledge when people are naturally looking for their next move.

“Generally, the new management—and regulators, if they’re involved—will preemptively make offers to the core people they know they need on board to run the bank, because they don’t want everyone to jump ship. So they might say, ‘We’ll guarantee your job for the next year, give you the same bonus as last year, and offer 1.5 times your salary,’ so that employees will be happy to stick around,” says one former bank data executive.

Strategic projects take a back seat. The merger becomes the priority, and multi-year strategic projects slow down. The tactical part is ‘all hands on deck’ for the merger, then figuring out the roadmap for the future, then you go back to strategic initiatives

Peter Serenita, CDO Advisory Services

Why are these people considered so important? The former bank data exec explains: “In these banks, a lot of core systems are very poorly documented. Nobody’s going to be able to come in and take over those without a proper handoff and knowledge transfer.”

Of course, this won’t remain true forever. Ultimately, the firms will make decisions and are unlikely to retain their full combined headcount. And at that point, salaries—which may rise in the short term—may be an issue.

“I’m sure the finance and HR teams at UBS are looking at the Credit Suisse compensation costs, and if they see disparities between people doing the same jobs, that may factor into decisions,” about potentially renegotiating salaries, or even about deciding which teams remain, says Brennan Carley, managing principal of strategic advisory firm Proton Advisors.

‘Talent always wins’

For those let go, or who decide to leave, there may still be other opportunities. The former bank data executive describes a “feeding frenzy” for former Lehman Brothers IT staff by other banks, following the firm’s bankruptcy in 2008. A former bank vendor manager also notes that there’s always room for talented staff.

“Talent always wins out, and companies always want talent. And if the tens of thousands of businesspeople [who are expected to be laid off from the merged entity] get hired elsewhere, then those firms will need additional data and technology staff to support them,” they say, adding that what the trees of Credit Suisse and UBS shed could form the seeds of new innovation, with former staff starting their own companies that also require data, staff, funding and real estate, pumping new life into the economy overall.

Looking down the line, strategic projects put on hold while focusing on the integration will need to be resurrected—and they’ll need staff to run them. Indeed, notes Burton-Taylor’s Iati, after a year or so of transition projects, the merged firm may find itself growing and have a need to keep those staff—or even hire more staff to support its growth.

But making sure you’re still there once that happens may depend on your performance at this moment, Serenita says.

“In general, strategic projects take a back seat. The merger becomes the priority, and multi-year strategic projects slow down. The tactical part is ‘all hands on deck’ for the merger, then figuring out the roadmap for the future, then you go back to strategic initiatives,” he says. “One thing about mergers is that there’s always cost savings involved. They can come from everywhere, and data people are not immune to that. But good performers do get noticed, and there’s always the possibility to remain—and even advance—in the new organization.”

The key, he says, is to make yourself vital to the new organization by integrating into and driving forward the integration process, and by being seen to be focused on executing and delivering on the mission of the combined firms.

The former bank data exec echoes this, noting that when his firm was acquired by a larger bank, “for the most part, our market data team ended up in a fairly good position” and took over running components of the new parent’s platform—in no small part due to the fact that the larger firm was able to identify business lines and supporting data and technology platforms that it found attractive and therefore saw benefits in retaining the staff behind those. And several sources say they hold the data and technology teams at both Credit Suisse and UBS in high regard.

Though the firms will urge calm, there may well be a period of chaos as the dust settles. “Right now, everyone at Credit Suisse is probably running around with their hair on fire. There will be a lot of concern and a lot of confusion,” the former bank data exec says.

That’s why, between now and then, communication is key: “Openness and transparency always work well, especially when people are uneasy—and mergers tend to cause people to be uneasy! The role of managers is to get close to their people and provide updates and address their concerns … to relieve some of the anxiety,” Serenita says.