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February 2024
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February 2024
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In Asia, UBS-Credit Suisse merger seen to offer both prospects and tests

UBS

The merger of UBS and Credit Suisse poses both challenges and opportunities for Asia’s asset managers, according to Ricky Tang, co-head of client portfolio management at Hong Kong’s Value Partners Group.

UBS’s US$3.2 billion takeover of the troubled Credit Suisse, orchestrated by Swiss authorities, will pool together $5 trillion of assets of Switzerland’s largest and second largest banks.

Swiss regulators also instructed Credit Suisse to write down 16 billion Swiss francs ($17 billion) of additional tier-one bonds, widely regarded as relatively risky investments, to zero. The move has angered the bondholders as their investments appear to have evaporated, while shareholders will receive payouts as part of the takeover.

After the deal was struck, senior management of UBS said in an analyst call on March 19 that it enables the bank to scale its global wealth and asset management franchise in high growth areas.

“While UBS is stable and so the acquisition should provide reassurance to Credit Suisse customers, we also believe that what happened has dented some customers’ confidence. And the fact that many bankers have chosen to leave the firm also means some of the assets under management might be leaving the firm,” Tang tells Asia Asset Management. “This is going to create some opportunities for the rest of the [asset management] industry in the near term.”

But he points out that the combined entity will be much bigger, with potentially more comprehensive offerings, which could cut down the need for further outsourcing of asset management. It would also hold greater bargaining power in product distribution negotiations with asset managers, who may see their margins pressured and squeezed.

During the analyst call, Ralph Hamers, UBS Group’s now outgoing chief executive officer, said that the bank’s wealth and asset management strength in Asia Pacific, specifically in Hong Kong, Singapore and China, will be complemented by Credit Suisse's leading position in Southeast Asia.

Meanwhile, regulators in Singapore and Hong Kong sought to reassure investors that Credit Suisse’s operations continue without interruptions or restrictions.

In a statement on March 20, the Monetary Authority of Singapore pointed out that the two Swiss banks mainly conduct private banking and investment banking in the city state and do not serve retail customers.

The Hong Kong Monetary Authority said Credit Suisse’s operations in the city comprise a branch under its supervision and two units supervised by the Securities and Futures Commission.

The branch’s assets totalled HK$100 million ($12.74 million), representing less than 0.5% of Hong Kong’s total assets, and therefore “exposures of the local banking sector to Credit Suisse are insignificant”, the HKMA said in a statement on March 20. It also noted the two units supervised by the securities regulator are not among the top ten active brokers in the stock and derivatives markets.