UBS Group AG Chairman Colm Kelleher said he would manage Credit Suisse Group AG’s investment bank, reducing a source of losses in recent years in a move that could potentially see parts of the unit sold under the CS First Boston brand. Will end the carving plan.
“Let me be very specific on this: UBS intends to underpin Credit Suisse’s investment banking business and align it with our conservative risk culture,” Kelleher said at a press conference on Sunday announcing the deal. Complicated business that we inherited.”
The acquisition of Credit Suisse announced by UBS on Sunday creates significant overlap in the new combined bank, not least the entity that suffered multibillion-dollar losses in 2021 from the implosion of Arcigos Capital Management. The joint investment bank of UBS and Kelleher said Credit Suisse would hold no more than 25% of the total entity’s risk-weighted assets over time.
UBS is carrying a portfolio of “difficult-to-evaluate” non-liquid assets, including long derivatives as well as swaps, for which the bank negotiated loss guarantees from the Swiss government. Given the fast nature of the deal, UBS was not able to perform due diligence on the portfolio, although Kelleher said there is no reason why Credit Suisse did not mark them correctly. The bank is expected to make a first loss on closing the portfolio of up to 5 billion Swiss francs ($5.4 billion), and the government will support an additional 9 billion francs in potential losses.
klein deal
A central issue of Credit Suisse’s now-defunct strategy turnaround that was unveiled in October was the spin-off of parts of the investment bank led by former dealmaker Michael Klein under the CSFirst Boston brand. Businesses placed in the unit over the weekend became a sticking point in negotiations to arrange the merger.
Kelleher emphasized that UBS has its own investment banking unit, though did not directly address spin-off plans. Klein stands to miss a big payday, as he stepped down from the supervisory board, and recently sold his boutique investment firm to the bank in a $210 million deal that has yet to be completed before the acquisition. didn’t happen
UBS plans to continue with its strategy of a smaller capital-lite investment bank and may therefore use the Credit Suisse investment bank to strengthen its global banking business while managing the rest.
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