UBS insisted this week that “all options” would be considered for the bank’s Swiss activities.
Zurich, Switzerland:
Among many concerns over the new megabank created by the merger of UBS and crisis-hit Credit Suisse is how it will affect jobs and competition in Switzerland’s banking sector.
The Swiss government forced UBS to buy its rival for $3.25 billion after the collapse of three US lenders in March, raising concerns about Credit Suisse’s own financial health following a series of scandals in recent years.
But little has been said about the giant bank’s strongest part – its domestic retail banking division, responsible for mortgage lending and financing Swiss companies.
Credit Suisse’s heavy losses were mostly due to its international wealth management and banking divisions.
The Swiss division’s turnover fell just five per cent last year – while turnover in international wealth management dropped by almost a third, and investment banking plunged 54 per cent.
The scattered details around the complex integration are making investors impatient.
UBS insisted this week that “all options” would be considered for the bank’s Swiss activities, promising to share more details in the coming months.
UBS now ‘too big’
But investors are curious to know whether UBS will integrate the Swiss banking division into its domestic business, sell it, or even divest it through a share offering.
“One of the reasons that support the idea of a spin-off is probably the fact that UBS has become too big for the Swiss market since it swallowed Credit Suisse,” said Ipek Ozkaredskaya of Swissquote.
“Another could be to maximize the efficiency of the Swiss branch and offer Swiss customers an alternative to UBS.”
Keeping it as an independent entity appeals to many in Switzerland – especially as it could prevent mass layoffs in the vital banking sector.
Together, the two banks employ 120,000 people worldwide, including 37,000 in Switzerland.
“Full integration would mean UBS would have to take on a lot of costs and sack a lot of people at Credit Suisse,” said Andreas Venditti, analyst at asset manager Vontobel.
Credit Suisse itself considered a partial IPO of its Swiss branch in 2016.
“We are still in favor of separating the Swiss branch,” Foundation Ethos, which represents pension funds in Switzerland, told AFP.
Athos said this was the best option not only to protect jobs, but also to avoid concentrating risks in one giant bank.
Venditti says that UBS “can make the front office of Credit Suisse Switzerland itself … (the brand) will survive and the two banks will compete.”
“If the situation stabilizes in a few years it would be a good time to bring this new smaller Credit Suisse into the market,” he said.
JP Morgan analysts said that splitting it off as an independent arm could create a divestiture worth at least $10 billion for UBS.
“We know that a spin-off can unlock value,” Ozkaredskaya said.
And it could help calm investors nervous about the threat of “a giant that just got even bigger after the merger,” he said.
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