Top bankers try to convince investors of the benefits of a 'marriage' which was 'done at gunpoint'.
Two days after UBS agreed to spend $3.25 billion to bail out rival Credit Suisse, top bank executives are trying to convince investors of the benefits of a “marriage” that was “done at gunpoint”, they note in analysis by the Financial Times.
With wealth management assets of $3.4 trillion, UBS will become the second largest private bank in the world, behind Morgan Stanley.
< /blockquote>
Ralph Hammers, chief executive of UBS, told the FT that the deal “is not just about bringing two companies together” but about “how we can create an even bigger UBS”.
This bailout, which creates the world's fourth-largest bank by assets (with 120,000 employees and $5 trillion in assets under management), some worry it could distract UBS executives.
< p>
UBS executives maintain, however, that they have not been forced to go ahead with the deal, which will boost the bank's earnings per share by 2027 at the latest. The same executives point to the low price they paid for a company that had a market capitalization of $7.5 billion last week and the $108 billion it has pledged to provide as a safety net liquidity line of credit from the Swiss Central Bank.
With wealth management assets of $3.4 trillion, UBS will become the second largest private bank in the world, behind Morgan Stanley. It will also become the largest wealth manager in Southeast Asia and the Middle East, and one of the top managers in Latin America thanks to Credit Suisse's Brazilian division.
However, the deal will not help UBS to developed in the U.S. after Credit Suisse pulled out of the U.S. market in 2015.
In recent months UBS has seen clients leave Credit Suisse flocking to it. “The inflows we saw last week prove that we are a safe haven,” Ralph Hammers told analysts.
However, UBS will no longer be seen as an alternative to Credit Suisse, and wealthy clients could therefore be tempted to send their money elsewhere. Julius Baer, which has a strong presence in Asia, is expected to benefit: its share value is up 13% this week.
UBS and Credit Suisse together, after the bailout, have more than 35,000 employees in Switzerland alone (Credit Suisse has about 17,000 there). Many of these jobs may, however, be lost in the future when UBS starts closing branches and eliminating redundant positions. At the moment, however, UBS does not seem to be willing to “get rid of” Credit Suisse's domestic bank, which is, as the FT reports, the most valuable of the rescued Swiss bank's assets.
< p>If UBS's $1.1 trillion asset management business is combined with Credit Suisse's $400 billion counterpart, it would create Europe's third-largest asset manager.
Otherwise , the most precarious of Credit Suisse's divisions is its investment bank, as the FT notes. This is the division where most of Credit Suisse's scandals and losses in recent years have reportedly come from, and in that light many of Credit Suisse's 17,000 investment bankers could lose their jobs.
Source: 24h.com.cy
