Hey, UBS likes Credit Suisse's Asian business
UBS has picked up some unwanted assets following its $3.25bn acquisition of Credit Suisse after a government-enforced rescue at the weekend, but UBS CEO Ralph Hamers is excited about the benefits the deal will bring the combined bank in the Asia-Pacific region.
UBS shares were down 14% on March 20 following the announcement of the deal, but Hamers says Asia is a bright spot for the combined entity. UBS regards the expansion of its Asian wealth management and investment banking businesses as strategic priorities, and Hamers told analysts that the deal will “accelerate the organic opportunity.”
Hamers said that Asian expansion and certain assets in the US were the principal benefits of a transaction which is otherwise portrayed as an exercise in limiting downside risk.
Speaking on a hastily-arranged call to announce the deal on March 19, Hamers said that Credit Suisse’s strength in South-East Asia will ‘complement’ UBS’s strengths in Hong Kong, Singapore and China. UBS has earmarked South East Asia as an area of growth and was planning to recruit staff there over the next 18 months.
Snapping up Credit Suisse will enable UBS to achieve its aims. “What Credit Suisse brings on the wealth side is quite complementary to our strength. If you look at Asia where we are focusing on growth, where we are less present and where they are really strong is South East Asia. “This is really helpful for us to have [Credit Suisse’s] franchise but also the skills to deal with that particular client base and if we feel we can grow faster there then we will,” he told analysts.
“With our strength in Hong Kong, Singapore and China that will be complemented by Credit Suisse’s leading position in South-East Asia and we can accelerate our organic strategy here with an inorganic opportunity.”
In Asia, UBS’s investment banking strategy is closely linked with its wealth management business as it looks to offer advice and financing to the region’s growing pools of wealth. The acquisition has doubled the invested assets in comparison with the next player. “The interplay between wealth management and the investment bank is more important in Asia than in anywhere in the world because of the type of clients,” Hamers told the Morgan Stanley financial conference during a speech on March 14.
In investment banking, both UBS and Credit Suisse regard China as core to their operations in the region and that this where the deal could create some overlap. UBS owns 67% of its securities venture in Beijing, where Hamers described UBS as the ‘go-to’ investment bank. Meanwhile, last September Credit Suisse bank reached an agreement to buyout is joint venture partner Founder Securities' 49% stake in the Credit Suisse Securities (China) for 1.14 billion yuan ($163.92 million). At the same time, Credit Suisse applied to acquire a licence to offer wealth management services to local clients.
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