UBS's Post-Credit Suisse Integration: Navigating Workforce Delays and Cost-Cutting Risks

The integration of Credit Suisse into UBS has been a defining challenge for the Swiss banking giant, reshaping its operational landscape and testing its resilience in a volatile financial environment. While UBS has made significant strides in cost reduction and efficiency, the slower-than-expected workforce reductions and integration complexities raise critical questions for investors: Can UBS maintain its competitive margins and long-term profitability amid these delays?

The Workforce Reduction Conundrum

UBS's target of reducing its full-time headcount to 85,000 by 2026—a key pillar of its post-merger strategy—now appears out of reach. As of June 2025, the bank has averaged only 1,300 job cuts per quarter since early 2024, leaving it with over 105,000 employees. This shortfall stems from lower-than-expected attrition rates and a strategic preference for internal hiring, which filled two-thirds of open roles in Switzerland in the past year. While UBS prioritizes natural attrition and early retirement programs to minimize disruption, these methods inherently slow progress.

The delay is compounded by operational constraints. Legacy Credit Suisse systems remain active until the migration of Swiss retail clients is finalized by March 2026. This cautious approach, while prudent, prolongs the timeline for full integration and limits immediate cost savings. For investors, the question is whether UBS's focus on headcount targets overshadows its broader cost-cutting achievements.

Cost-Cutting Progress: A Mixed Picture

Despite the workforce challenges, UBS has advanced its cost-reduction goals through structural and technological initiatives. By Q2 2025, the bank had achieved $9.1 billion in cumulative annualized gross cost savings, 70% of its $13 billion target by 2026. This includes $3.4 billion in 2024 savings alone, driven by the integration of Credit Suisse and the run-down of its Non-Core (NCL) portfolio. Risk-weighted assets in the NCL unit fell from $86 billion in 2023 to $30 billion by mid-2025, reflecting disciplined portfolio rationalization.

UBS's cost-to-income ratio, a critical metric for operational efficiency, improved from 105.7% in Q4 2023 to 80.5% in Q1 2024. This progress is underpinned by AI-driven automation, such as its in-house assistant “Red” and cloud infrastructure investments, which streamline back-office functions and reduce labor costs. The bank aims to push this ratio below 70% by 2026, a target that, if achieved, would position it among the most efficient global banks.

Strategic Trade-Offs and Competitive Positioning

UBS's approach to integration highlights a strategic trade-off: short-term integration costs versus long-term efficiency gains. While integration-related expenses are projected to reach $14 billion by 2026, the bank's focus on AI and automation mitigates these costs by enhancing productivity. This contrasts with peers who rely more heavily on traditional cost-cutting measures. UBS's ability to leverage technology not only reduces operational costs but also strengthens its competitive edge in wealth management and asset management, where client retention and digital capabilities are paramount.

However, regulatory headwinds loom large. Proposed Swiss capital requirements could necessitate an additional $42 billion in CET1 capital, potentially straining UBS's capital buffer. The bank's CET1 ratio of 14.4% in Q2 2025 provides some flexibility, but investors must monitor how regulatory pressures interact with integration costs.

Investment Implications: Balancing Risks and Rewards

For investors, UBS's delayed workforce reductions are a double-edged sword. On one hand, the slower pace of job cuts may delay full cost realization, potentially impacting near-term profitability. On the other, UBS's emphasis on natural attrition and early retirement programs reduces reputational and operational risks, preserving employee morale and client relationships. The bank's focus on cost targets over headcount metrics also suggests a pragmatic approach to achieving its $13 billion savings goal.

The key risk lies in the interplay between integration delays and macroeconomic volatility. UBS anticipates weaker economic prospects outside the U.S., rising inflation, and geopolitical uncertainties, all of which could dampen investor demand for wealth management services. However, its diversified revenue streams—supported by recurring fee income from asset management and a robust capital return strategy—offer resilience.

UBS's share buyback program and 29% dividend increase for 2025 signal confidence in its financial flexibility. Yet, investors should scrutinize the bank's ability to maintain these returns if integration costs or regulatory burdens escalate. A could provide insights into market sentiment, though volatility is likely to persist given the integration's complexity.

Conclusion: A Calculated Path Forward

UBS's post-Credit Suisse integration is a high-stakes balancing act. While the slower workforce reductions pose near-term risks, the bank's progress in cost-cutting, digital transformation, and capital management provides a strong foundation for long-term profitability. Investors should view UBS's strategy as a calculated, technology-driven approach to navigating a turbulent financial landscape.

For those with a long-term horizon, UBS's disciplined cost management and strategic investments in AI and automation offer compelling upside. However, short-term volatility and regulatory uncertainties warrant caution. Diversifying exposure to UBS's peers, who may adopt different integration strategies, could also mitigate risks. In the end, UBS's success will hinge on its ability to turn integration challenges into sustainable operational efficiencies—a test of its resilience and adaptability in an era of relentless change.